Future Now, Inc.
Future Now, Inc.
Future Now, Inc.
Incorporated: 1976 as Cincinnati Word Processing
Sales: $700 million
Stock Exchanges: NASDAQ
SICs: 7373 Computer Integrated Systems Design; 8243 Data
Future Now, Inc. is one of the largest computer resellers in the United States, supplying various computer support services through more than 25 offices in 19 states. In addition to providing direct sales to business, Future Now is also a leader in computer consulting services, and, after experiencing rapid growth in the late 1980s and early 1990s by acquiring other resellers and boosting its service offerings, has become a force in the fast-paced computer networking field.
The forerunner to Future Now, Inc. was Cincinnati Word Processing (CWP), a company formed in 1976 to sell and service Wang word processing equipment. It was generating about $1.5 million in annual sales when it caught the eye of Terry L. Theye in 1978. Theye, then a marketing executive at IBM, was eager to run his own enterprise, and bought CWP. During the remainder of the late 1970s and throughout the early 1980s, CWP posted slow but steady gains by offering a constantly changing mix of computer equipment and services. By 1985, Theye’s Cincinnati-based CWP was generating about $3 million in annual revenue. The company was purchased in that year by Central Investment Corp., but Theye stayed at the helm.
CWP’s stable growth during the 1980s was partially a result of increases in the overall demand for computer equipment and services. More importantly, it reflected Theye’s ability to adapt to rapidly changing technology and markets. Notable was the emergence of a trend away from giant mainframe systems and turnkey devices to smaller workstations and personal computers (PCs). CWP started out selling and servicing dedicated word processing systems. The contraptions, though advanced at the time, were soon made obsolete by less-expensive, more flexible desktop systems. Theye quickly changed his company’s focus in response to the transition, and CWP began selling microcomputers.
Typical of other computer resellers at the time, CWP offered a complete package to its clients. Many companies were relatively computer illiterate in the early 1980s and wanted a knowledgeable company that could analyze their needs and propose a solution. Likewise, computer manufacturers and distributors needed intermediaries that could help buyers actually put their equipment to use. CWP, acting as an authorized dealer for different computer companies, would help its clients set up appropriate systems, including computers and all peripherals (such as video monitors, printers, and keyboards). Besides charging a mark-up on the equipment, CWP would profit from installation fees and by supplying ongoing service to its customers.
CWP enjoyed a healthy demand for its services during the early 1980s, and even into the middle part of the decade. But markets again began to shift. By the mid-1980s, computer users had become much more sophisticated. At the same time, computers were becoming more powerful and easier to use. A paradoxical corollary to the change was the gradual transition of computer hardware to a commodity-like good. Customers were increasingly able to purchase and set up their own systems, and they were more commonly buying their systems to accomplish specific tasks. Numerous new marketing channels opened up, such as discount warehouse stores and mail-order computer dealers, that offered little or no service. The end result for most independent dealers like CWP was that profit margins, particularly on equipment, were pinched.
Recognizing the need to adapt to new industry dynamics, Theye changed his business strategy to take advantage of what he viewed as emerging opportunities. In late 1980s, CWP management realized that the market for services was not necessarily drying up. Instead, user needs were changing. In the past, buyers were seeking advice related primarily to installing and using hardware. By the late 1980s, though, they needed more help with applications and software. For example, an increasing number of companies were looking for outside advice on how to interface multiple software packages on the same system. More specifically, they were interested in networking the PCs in their system to allow users to communicate with each other and to access peripherals and centralized information on servers.
CWP’s answer to new market demands was a “solution center “approach to computer sales. That tactic entailed offering an array of equipment brands and showing customers how to hook up and smoothly integrate a multitude of different software packages. CWP eventually set up an actual solution center in its main Cincinnati office. There, computer systems and software were set up as they might be in a customer’s office. Vendors, sales representatives, and customers used the center to come up with practical solutions to problems. In order to expand its market, CWP also began offering full lines of IBM, Apple, Hewlett-Packard, Zenith, and Compaq computers and peripherals, in addition to selling Wang equipment, which had been CWP’s mainstay—at that time CWP was the largest independent Wang dealer in the United States, and was named dealer of the year by the company in 1987.
While to expanding product offerings and adjusting its service approach through the solution center concept, Theye and his fellow managers launched an aggressive initiative in the mid-1980s to grow through acquisition. Theye recognized that a major takeout was occurring amongst the horde of small independent dealers that had dominated the service and distribution market in the early 1980s. CWP believed that the only survivors would be those companies that could achieve economies of scale by purchasing competitors and establishing regional or nationwide networks. They also realized that service, rather than hardware, would drive profit growth. “They [independent resellers] basically had two choices,” recalled Elliot Markowitz, editor of Computer Reseller News, in the August 1, 1993 Cincinnati Inquirer. “They could either sell out to a competitor or compete on the acquisition trail.”
In 1988 CWP purchased two Cincinnati computer retail outlets from Donnellon McCarthy Inc. The stores, which were named Future-Now, boosted CWP’s field sales staff to 24 and broadened its core Wang product line to include the brands mentioned above. The purchase also cemented CWP’s status as one of the largest computer dealers in southern Ohio. CWP moved one of the stores to its 17,000-square-foot headquarters, and it retrained the staff to attune them with CWP’s service orientation. Later that year, Theye and fellow managers, along with investment firm Reynolds DeWitt & Co., lead a management buyout of the company from Central Investment Corp. They jettisoned the obsolete CWP name in favor of Future Now Corp. The newly organized Future Now posted sales of about $20 million during 1988.
Throughout the remainder of the 1980s and during the early 1990s Future Now achieved stellar growth, mostly as a result of its acquisition efforts. Early in 1989, Future Now reached an agreement to purchase the Indianapolis franchise of Today’s Computers Business Center (TCBC), the leading computer retailer in its geographic market. It also bought a sister Indianapolis business called Nitro Micro that sold computers and related supplies by mail order. Those purchases helped to boost Future Now’s revenues to nearly $50 million in 1989, and its work force to about 150. Future Now reorganized and streamlined its new Indiana division, even adding a solution center in Indianapolis. Meanwhile, back in Cincinnati, Future Now’s headquarters swelled to 28,000 square feet.
Future Now extended its reach into Kentucky with the acquisition of Paris Office Systems in Louisville in January of 1990. This increased the company’s number of regional offices to four, located in Cincinnati, Columbus (Ohio), Indianapolis, and Louisville. In April of 1990, Theye stepped aside as president of Future Now, although he retained a seat on the company’s board of directors and remained chief executive. He transferred the presidency and day-to-day operating control to Lewis E. Miller, the former vice-president of operations. Miller, also a former IBM employee, had joined Theye in the 1988 buyout of the company. By the end of 1990, Future Now employed about 180 people and captured revenues of about $90 million annually, while continuing to focus on its core commercial markets, including businesses and educational institutions.
Future Now’s strong growth between 1988 and 1990 was a mere precursor to the explosive advances that would follow in the early 1990s. In 1991, Future Now stepped up its aggressive acquisition program. It bought a small computer center in Dayton in April before spending $650,000 in July on Entre Computer Centers, a Virginia-based chain with an outlet in Louisville. In November, the company added three more companies to the Future Now fold: STKS, Inc, Kleine Company, and Multiple Connections. Those purchases, worth a total of about $2.5 million, broadened the company’s sphere to Illinois and Iowa. In December, Future Now bought Micro Computer Center, Inc., for $2 million, giving it access to customers in Arkansas and Tennessee. Future Now’s sales bolted to $139 million in 1991 as net income topped the $3 million mark.
Acquisitions continued in 1992. Future now picked up Evergreen Systems of Milwaukee for about $1 million in January. Then it completed a major purchase. Future Now had served as a reseller for products supplied by a company called Intelligent Electronics Corp. Intelligent Electronics was looking to get out of the service business, though, and focus instead on its hardware operations. So, in July, Intelligent sold its Computer Centers Division (CCD) to Future Now for about 30 percent of the purchaser’s stock (valued at roughly $20 million). CCD represented a major addition to the company’s holdings. The new division was expected to add $200 million in revenues, and would give Future Now nine different offices in cities across the United States, including Boston, Dallas, St. Louis, New York, and Los Angeles. As a result of the buyout, Future Now’s 1992 revenues vaulted to $343 million, about $5.7 million of which was netted as income.
Future Now’s national expansion drive during the early 1990s was complemented by its innovative operational strategy. Its tactics were relatively straight-forward. The company focused on the evolving computer services and consulting business (particularly related to networking), which it considered more profitable that the hardware distribution side of the business. It purchased smaller, often-ailing distributors as a way to expand its services into new geographic markets. The success of the strategy was reflected in the fact that by 1993 the percentage of its revenues attributable to services and consulting were about three times higher than the industry average for all computer resellers. Future Now also profited by relying on outside suppliers, such as Intelligent Electronics, rather than maintaining its own warehouses.
Future Now wowed observers again in 1993 by more than doubling its annual sales to $700 million. Fortune even ranked the company as the 27th fastest growing corporation in America. Big gains were primarily the result of a $12 million buyout of Basicomputer Corporation, a huge, Ohio-based reseller with offices strewn about the Midwest and East Coast. That purchase, combined with three smaller acquisitions valued at a total of about $3.5 million, boosted the corporation’s work force to more than 1,800 by the end of 1993. Since 1988 Future Now had conducted 15 acquisitions, resulting in a national network with 30 regional offices. By 1994, Future Now had established itself as a leading national computer reseller and a leading provider of related services.
Unfortunately, Future Now’s earnings—about $9 million in 1993—were not keeping pace with its sales. Management decided to pause during 1994 and reorganize its spreading enterprise, spending about $35 million on restructuring. Part of its reorganization entailed selling off its operations in five of its largest markets: New York City, Los Angeles, Boston, Baltimore, and San Francisco. The sale reduced the company’s revenues by about $200 million in 1994, but brought $40 million in cash into its barren war chest. Future Now sold the concerns to its partner, Intelligent Electronics. Intelligent benefited from new distribution channels and Future Now profited by continuing to manage the offices for a fee. The cooperative effort reflected Future Now’s intent to focus on its core competency, professional services, and Intelligent’s ongoing penetration of the national hardware market.
After closing 23 branch offices and consolidating sales and management operations during 1994, Future Now planned to resume its acquisition drive in the mid-1990s. It also planned to spend an additional $15 million in restructuring as part of its ten-year plan to boost sales to $10 billion by the year 2005.
Professional Services Group
Boyer, Kerry, “Acquisition Helps Future Now Grow at Explosive Rate,” Greater Cincinnati Business Record, May 31, 1993, p. 1.
_____, “Future Now Takes a Breather from Acquisitions,” Greater Cincinnati Business Record, November 22, 1993, p. 1.
Boyer, Mike, “Byte-to-Byte Growth: Computer Resell Firm Future Now Expands in Waves of Acquisitions,” Cincinnati Inquirer, June 29, 1992, p. D1.
_____, “Future Now Gobbles Up Rivals,” Cincinnati Inquirer, August 1, 1993, p. Dl.
Carlson, Alicia, “TCBC Founder Sells Computer Dealership to Ohio-Based Company,” Indianapolis Business Journal, May 8, 1989, p. S3.
“Computer Services Industry,” Cincinnati Business Courier, November 12, 1990, p. 22.
Fisher, Susan E, “Intelligent Electronics to Sell Company-Owned Stores,” PC Week, February 24, 1992, p. 168.
Gee, Robin, “CWP Buys Future Now Stores; 1988 Sales May Reach $20 Million,” Cincinatti Business Courier, February 8, 1988, p. IB.
Harrington, Jeff, “Computer Firm’s Future Goals May Come Early,” Cincinnati Business Courier, June 26, 1989, p. 10B.
_____, “Future Now Buys Indy Companies,” Cincinnati Business Courier, May 8, 1989, p. 1.
McConnell, Bill, “Future Now Sells Baltimore Operations,” Daily Record, November 4, 1994, p. 3.
Milstead, David, “Future Now Shifts Focus, Consolidates,” Cincinnati Business Courier, December 12, 1994, p. 1.
Roethe, Jennifer, “For Success in Computers, the Future is Now,” Cincinnati Courier, June 18, 1990, p. 9B.