Breaking Out of the Pack : Procom’s Independent Ways Have Helped It Succeed in Economic Downturn
Orange County is full of small technology companies that have big ambitions. Alex Razm’joo, president of Procom Technology Inc., runs one such company.
Razm’joo’s company, which makes data-storage equipment that can be hooked to networks of personal computers, isn’t about to overtake leaders in the computer industry.
But in an economic slowdown that has felled a host of ambitious upstarts, Procom is enjoying brisk growth. Sales were up 155%, to $28 million, for the company’s year ended July 31. It employs 125 people, up from about 100 a year ago.
Within the next nine months, Razm’joo expects to expand his work force by about 15 to 20 people. He says the privately held company has had 17 consecutive profitable quarters and maintains a healthy 35% gross profit margin. (Gross profit is a commonly used gauge of manufacturing efficiency.)
Razm’joo is aiming at $40 million in sales for its current fiscal year and $65 million the following year.
In an unusual move for technology companies, Procom expects to finance its growth without outside loans or venture capital. Razm’joo hopes to take the company public sometime in the future.
“To build a company that size with no outside funding is unusual,” said Roger Davison, general partner at the Brentwood Associates venture capital office in Irvine. “They are at a threshold size, and I think there are challenges to manage a company that is growing that fast.”
Razm’joo said the company owes its success to its concentration on providing add-on storage equipment, such as hard-disk drives for computer networks.
“Relative to competitors, they’re in a strong position because of their emphasis on research and development,” said Allen Taylor, a computer-storage consultant in Irvine. “The profits have been beaten out of the lower end of the market, but Procom has differentiated itself from the pack with its emphasis on the high end.”
Procom is a young company. Most employees are in their 20s; pictures of heroes such as Luke Skywalker from the “Star Wars” movies hang in their work spaces, and many employees play soccer together on the weekends.
The youthful executives like it that way. Razm’joo, 29, and three other classmates from computer engineering school at UC Irvine started the company in 1987 with $40,000 in savings.
The four founders, Iranian-born immigrants who came to Orange County to study at UCI, worked in the computer industry while attending school. Both Razm’joo and Nick Shahrestany, now a Procom executive vice president, worked at CMS Enhancements Inc. in Irvine. After they graduated, they decided to put that experience to work by starting their own company.
“We learned about American culture in Iran and even watched the Lakers on television,” Razm’joo said. “English was our second language and something of a barrier, so this (computer) area was where we felt we had the same opportunity.”
Two other founders also maintain a role with the company: Frank Alagband is executive vice president of operations, and Alex Aydin is executive vice president of finance.
The idea that launched Procom was simple. In 1987, International Business Machines Corp. launched its PS/2 personal computer line. It featured the industry’s first 3.5-inch floppy disk drives, which could store more data in a space smaller than the previous standard 5.25-inch drives.
Razm’joo saw that most users who had existing software would need an external 5.25-inch floppy disk drive to convert their software to the new format. The company designed such a drive, found subcontractors to build it and sold its first products in August, 1987.
“We saw an opportunity to start a new company at ground zero, when there were no other competitors,” he said. “Our cash flow was established, and we didn’t have to borrow money or seek venture capital.”
Procom sells more than 270 products for computers made by IBM, Apple and other manufacturers. Procom designs many of its products so they can be used interchangeably with different manufacturers’ computers.
That is, with Procom’s software, a storage drive hooked to a Macintosh can be disconnected and hooked to an IBM machine within a few minutes. Such devices are especially useful in large corporations or small businesses, where departments often use different makes of computers.
Procom faces fierce competition in its markets. It competes with a variety of larger companies in each of its markets, including CMS and MicroNet Inc. in Irvine, another company started by former CMS employees.
MicroNet, which boasts 800 products and expects to report $60 million in sales this year, is also staking out the same network storage market as Procom, said Alex Grossman, national sales manager. But MicroNet focuses on higher-capacity storage products than Procom, he said.
“They’re a good competitor,” Grossman said.
As Procom grows, it is adding to its 1,200-dealer network, and in the past year it has signed distribution agreements with computer retail chains ComputerLand Corp., Intelligent Electronics Inc. and JWP/Businessland Inc.
Next March, Procom plans to move to a new 50,000-square-foot headquarters in Irvine, more than double its current office space.
The company has begun shipping a line of products for so-called multimedia computers, which incorporate compact disc-quality sound, graphics, video and text.
Procom is now selling CD-ROM (compact disc, read-only memory) drives, which store massive volumes of data using optical technology.
“Their focus on the networking and multimedia segments makes them unique in the market,” said Steve DeLuca, an analyst at Cruttenden & Co., an investment banking firm in Irvine. “Normally, when you hear of a storage company, you think, ‘Big deal.’ ”
Hot Technology Procom Technology in Irvine designs mass data-storage equipment for Macintosh, IBM and other personal computers that are hooked together in corporate networks. Revenue in millions of dollars: 1988: $2.5 1989: $12.0 1990: $18.0 1991: $28.0 Source: The company
