It's All In The Packaging

You don't see many computer-systems startups nowadays. Rarer still are ones that throw lavish coming-out parties. That's a throwback to the '80s, when dozens of new PC makers, flush with venture money, spent big to grab the spotlight. But Panda Project Inc. isn't ordinary. During the PC Expo trade show in New York in late June, the obscure Boca Raton, Fla., startup threw a bash for analysts and reporters at the Temple of Dendur in the Metropolitan Museum of Art.

But what's really striking about Panda--named for the secretive nature of the Asian bear--is the performance of its stock. Since going public in May, 1994, Panda shares have skyrocketed nearly sixfold, to 32 on June 16--despite no revenues, no earnings, and a current cash-burning rate of $500,000 a month.

MIX AND MATCH. Panda's promise is the work of founder and CEO Stanford W. Crane Jr., a former AMP Inc. executive. His inventions for connecting the components within a computer, he says, can deliver big improvements in performance and reliability. How? By breaking a PC "motherboard" into separate modules for the microprocessor, memory, and communications sections--then connecting them with Panda's Compass technology, a superfast cable. That could let customers switch from an Intel chip to a DEC Alpha or a Motorola/IBM PowerPC--without changing computers. The first machine with the technology, Panda's Archistrat 4s server, features color-coded modules that snap in like Lego blocks. "I got excited because I finally saw something that could change the way the architect could lay out the PC," says Panda director Joseph A. Sarubbi, once manager of new products at IBM.

Crane's second invention involves the chip carrier, which connects a chip to a circuit board. The technology makes possible carriers with far more pins to attach to the circuit board--which means data can travel between the chip and the circuit board much faster. And that allows computer designers to take full advantage of the speediest chips.

"I think it's a very exciting concept," says Douglas J. Bartek, president of a subsidiary at chipmaker Cirrus Logic Inc. that is testing Panda's technology. Crane, who has licensed his connector technology to 3M Co., says he is talking to many potential customers. CompuCom Systems Inc., a PC distributor, will sell Panda servers. Such versatile PCs should appeal to the big companies CompuCom sells to, says Dataquest Inc. analyst Brad Day. "I would not be surprised if [Panda] goes from nowhere to $120 million by the end of '96," he says.

Certainly, that's what investors believe. The company, whose 90 employees operate out of the same complex where the IBM Entry Systems Div. hatched the PC 15 years ago, likes to emphasize the parallels with the wildly successful IBM unit. In addition to Sarubbi, Crane has recruited H.L. "Sparky" Sparks, a former IBM PC marketing whiz, and Bruce Smith, Panda's vice-president of engineering, who worked on the IBM PC.

Panda's stock has been on a spectacular ride. The underwriter was Whale Securities Co., a New York brokerage specializing in low-priced stocks. Helix Inc., a Canadian venture-capital firm with ties to Whale, has an 11% stake. As the June product launch neared, the thinly traded shares spiked--even though Crane concedes he needs new financing, perhaps a secondary offering, within 60 days.

Can Panda fly as high as its stock? Some big questions remain. First is whether PC makers will pay a premium for its technology when the market is buying record volumes. Also, Panda is taking on a lot--getting into systems and packaging simultaneously. Says industry consultant Amy Wohl: "This product looks really interesting, but I'd be a lot happier if they were more focused." Crane says he had to build systems to prove his technology works.

There are questions about Crane, too. His previous startup, Crane Electronics Inc., filed for bankruptcy and the investors who rescued it sued Crane for breaching an employment contract. The suit was settled and, says Crane, "I did absolutely nothing wrong there." He chose Whale because he did not want to cede control to venture capitalists, he says, and few underwriters would touch an early-stages company. Now, with Panda's market cap at $183 million, Crane's 36% stake gives him a $66 million paper fortune. It could turn into the real thing if this bear can survive in the computer jungle.

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