A. David Silver Revamps Computer Company : Author Takes on a Textbook Case
In his 1985 book “Entrepreneurial Megabucks,” financier A. David Silver offers a formula for achieving success in business: V=PxSxE. It means that value (V) is the product of a problem (P) that is approached with a solution (S) and an entrepreneurial team (E).
Even Silver, however, concedes the formula doesn’t always work if the P, or problem, is too big. That has been the case for Woodland Hills-based Pathfinder Computer Centers, a computer marketer Silver controls that hasn’t found a way to turn a profit.
Pathfinder opened its first store in Encino four years ago and, largely through an acquisition spree that heated up last year, grew to 18 stores in Southern California and the Southwest.
The jacket of “Entrepreneurial Megabucks” describes Pathfinder as “the largest independently owned computer retail chain in California.” The company, however, failed in its ambitious expansion into the slumping personal computer market last year. Pathfinder lost $4 million on sales of $16 million in 1985, raising its overall loss since it was founded to $6.3 million.
Pathfinder has been so strapped for cash that it defaulted last year on a promissory note and has had trouble paying its suppliers and maintaining credit lines, according to a December filing with the Securities and Exchange Commission.
Learned a Lesson
“The lesson is to move more slowly and be more cautious,” Silver said.
Silver, from Santa Fe, N.M., is revamping the company. He holds about 70% of Pathfinder’s stock through his Santa Fe Private Equity Fund. He will close at least 12 of the 18 locations and gear up a sales force to call on small and medium-sized businesses that may need mini-computers and personal computers.
In Los Angeles and Orange counties, Pathfinder will shut at least seven of its 10 stores. The staff has been cut from 85 to 65. Among those departing was Pathfinder’s president and chief executive, Jeffrey M. Boetticher, who resigned recently for what the company said were personal reasons. He was replaced by Alan J. Gragnani, who had been an executive with Gateway Computer, another computer retailer in which Silver invested.
Company executives are considering converting their remaining three Southern California facilities from conventional computer stores into what they call “mega-centers” that would be bases for their sales force. The company plans to operate three Southern California centers--in the San Fernando Valley, Orange County and somewhere near downtown Los Angeles--each staffed with 13 or 14 employees.
Southwest Store Closings
Pathfinder, which last year bought the eight-store Computer Superstores chain based in Albuquerque, N.M., also is closing all but three of its stores in the Southwest. The three remaining stores are being converted into the same kind of centers Pathfinder is establishing in Southern California. Eventually, the company plans to expand again by buying similar facilities.
The company’s changeover has been in the making since last fall, Silver said, when he and other Pathfinder executives concluded that computer stores had limited potential. Silver said he erred in turning the company into a typical computer retailer at a time when the market was saturated and suffering from weakening sales of home computers.
“People stopped coming into the stores, and we were caught with a lot of real estate we didn’t need,” he said.
Silver contends that large corporations and people who use computers at home have largely satisfied their computer needs. Now, he maintains, the only major supply of potential buyers are small businesses, which often are run by people too busy to visit computer stores.
Search for Customers
“You have to find the customers now,” Silver said. “They aren’t going to come to you.”
Market researchers tend to agree.
“There’s been a substantial shift of sales of personal computers away from people who walk into the stores,” said David Fradin, a personal-computer expert with Dataquest, a San Jose market research firm. “You now have to send a sales force out into the field.”
For Pathfinder, the changeover to direct sales may be trying. Bert Helfinstein, president of the Entre Computer Centers of America chain, said direct sale “is a very different business that requires a very different set of sales skills and technical skills.”
Furthermore, he said, many computer retailers are trying to make the same kind of change.
Silver built his company by acquiring small, fledging computer stores. After starting in Encino, the firm was headquartered briefly in Torrance. It moved its main offices to Woodland Hills last year after buying Rainbow Computing, a two-store company based there.
Known for Books
Silver is best known for his books, which are filled with offbeat theories on success in business. In one, “The Entrepreneurial Life: How to Go For It and Get It,” Silver portrayed the typical successful male entrepreneur as someone who led a deprived childhood, disappointed his mother, suffered from excessive acne, grew up fatherless and was smothered by an overprotective mother.
He said research for a new book he’s writing, “Female Fortunes,” shows that successful women were raised to be competitive, yearn to make a social imprint and “want to be a mother to a large number of people.” Silver also is writing a computer game for aspiring entrepreneurs in which players work to control the largest shares of their companies after $20-million stock offerings.
