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Micom Battling Babel in Computer Networks

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Times Staff Writer

Micom Systems built its business by getting computers to talk. Now it wants to get them to understand each other better.

The Simi Valley-based company, trying to become a leader in one of the data communications industry’s growing areas, is stepping up development of components used both to link different brands of computers and computers scattered among remote locations into smooth electronic networks.

The need for better data communications systems is clear. Many businesses have become electronic versions of the Tower of Babel, saddled with hodgepodges of computer equipment that cannot transmit data to each other effectively.

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That handicaps a business that might, for example, need to send data up and back between a Burroughs computer in its engineering department and a Hewlett-Packard model in accounting. Or, it might want to find a way to put a large computer in its New Jersey headquarters in touch with the personal computers in a Texas sales office or a minicomputer in an Ohio factory.

For 18 months, Micom has been spending heavily on research and development to shift its emphasis into more advanced products, the so-called computer networks that seamlessly carry data between disparate computers. Early next year, it plans to introduce what it hopes will be a cornerstone of that effort--a network management system that allows a personal computer user to serve as an electronic traffic cop, monitoring, adjusting and maintaining the flow of data.

The company’s new emphasis will pit it against formidable competitors, notably Digital Equipment Corp. Still, Roger Evans, Micom’s British-born president and chief executive, predicts that the computer equipment giants will leave Micom plenty of business by concentrating on ways to link their own equipment rather than components made by various manufacturers.

Besides, Micom executives say, the company will have a major competitive advantage because it offers products for both linking computer equipment within a single office and gear spread among remote locations.

Micom’s current business strategy stems partly from necessity. For two years, the company’s business has suffered from the overall softening of the computer industry.

Emerging from the most wrenching period in its 13-year history, the company also has been stung by the problem-plagued acquisition of Interlan, a New Hampshire company making high-speed communications equipment that uses cable to link computers and terminals in a single building or complex.

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After years of booming growth, Micom saw its earnings plunge 58%, to $10.8 million, in the fiscal year ended March 31. Meanwhile, its revenue, which had soared twelvefold over the previous five years, was off 2%, to $189.5 million.

Last year, the company laid off 175 workers, about 150 of whom were in Simi Valley, Northridge and Chatsworth, where it closed an assembly plant.

Like other high-tech stocks, Micom’s shares have taken a drubbing. It has closed below $15, down from nearly $50 in early 1984. The stock’s drop was so severe that company directors, sensing the possibility of a hostile takeover bid, got an anti-takeover measure adopted in July.

See End to Slide

Micom executives say, however, that the company’s two-year slide is over. Last month, the company reported a 5% rise in net income from a year earlier, to $2.8 million, in its second quarter ended Sept. 30. Although small, the gain represented the first quarterly profit increase for Micom in nearly two years.

In recent months, the market has improved for its best-selling products, known as DATA PABX equipment, which are electronic devices that allow computer users to switch from one minicomputer to another. Analysts caution, however, that any downturn in the economy could reverse recent gains.

“Micom will be more dependent on a general upturn in the industry than anything it can do on its own right now,” said Andy Schopick, an analyst with the Gartner Group in Stamford, Conn.

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Evans has acted this year to bolster Micom’s management. He said he hopes to transform the company from a relatively loose, entrepreneurial-style operation into a centrally managed organization. To that end, he hired senior executives who had been with some of the biggest computer companies, including Raymond Thomas, a former Burroughs controller who now is Micom’s chief financial officer.

Evans, 41, is a Cambridge-educated native of Yorkshire who collects American and French Impressionist art, including a painting by Claude Monet. Evans took over as chief executive last year from founder William A. Norred.

Norred, 46, still the company’s chairman, said he wanted to get away from day-to-day operations and had planned for some time to turn over the reins to Evans. Norred said he is spending most of his time now designing a new home.

Evans joined Micom in 1976 from Case, a British computer products company that was Micom’s largest customer in volume. Evans joined Micom as part of a joint venture between the two companies that eventually unraveled. He stayed anyway.

At first, Evans handled marketing by himself, and he showed a deft touch. For example, he designed a popular, relatively light-hearted trade magazine ad for a so-called data concentrator that squeezes electronic signals from various computer terminals into a single telephone line.

Tired of Boring Ads

Tired of seeing boring, technical ads, Evans came up with one that featured a can of orange juice concentrate bearing Micom’s name. The ad read: “Still squeezing data through the old-fashioned way? Concentrate. It’s cheaper.”

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The ad brought a lot of attention to Micom, which became known to some as “the orange juice company.” Subsequent Evans ads included ones with walnuts that asked customers if they were “shelling out too much money for high-speed modems” and a glass of wine urging them to drown their sorrows with Micom’s data concentrator.

In his current job, Evans has the more prosaic task of coping with the computer industry slump and Micom’s botched acquisition of Interlan, which came shortly before he was named chief executive.

Micom took Interlan apart, merging its marketing group with Micom’s and shifting manufacturing to other plants where costs were lower. Now, Evans says, the company “stubbed its toe” in failing to integrate the marketing organizations well and in creating morale problems by overhauling the young company. Norred adds that Micom underestimated Interlan’s competition.

At the same time, Micom’s product development stagnated in a business where products become outdated quickly. Evans says the company wasted time on ill-conceived projects that were too expensive for the market and on fine-tuning existing products rather than developing new ones.

Sees Management Gaps

“We weren’t as a management team communicating what we would build and what we wouldn’t build,” Evans said.

Micom’s products historically have been designed to help minicomputers and personal computers talk electronically by transmitting data through so-called local area networks that link computers within a building or a cluster of buildings. They also have made remote communications equipment such as modems that send and receive data primarily through leased telephone lines.

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Now, Evans said, Micom is moving to tie that sort of equipment together into coordinated “network subsystems.” Those subsystems will be chunks of the overall network systems that companies need to weave together computer components.

This year, Micom is introducing new products every few weeks as it moves increasingly into the network business.

Executives at Digital say they will be competitive in this area. But industry executives add that the market might be vast enough for Micom to grab a big chunk of business.

“There’s no way one company can provide every possible service,” said Fred Balfour, a Digital marketing manager.

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