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Eagle Computer, Recovering From Clipped Wings, Tries to Soar Again

September 15, 1985|CARLA LAZZARESCHI | Times Staff Writer

Gary Kappenman was so angry his hands shook and his voice quavered at least an octave above its usual range. A speaker at a high-tech conference had just named Eagle Computer as one of the casualties of the computer industry's shakeout and Kappenman, Eagle's co-founder and president, had stormed the microphone demanding a retraction and apology.

"I get so mad. We get put on these lists and then people all think we're dead" explained Kappenman, a dapper, 40-year-old bachelor who wears an eagle pin on his lapel and his feelings for Eagle on his sleeve.

A less involved listener might have overlooked the speaker's error entirely. After all, even if Eagle didn't actually file for bankruptcy late last year, it came dangerously close. Indeed, for many the Garden Grove-based company still serves as a textbook example of how unforgiving the overcrowded personal computer market can be.

Never Closed Doors

But the fact is, as Kappenman is ever anxious to impress, Eagle, unlike Osborne, Gavilan, Franklin and Columbia computer companies, never closed its doors and never filed for bankruptcy. In fact, Eagle, through a combination of fancy financial footwork and sheer scrappiness, has earned a rare second chance to prove itself in the computer industry.

"They used to say that we were a Cinderella story in the beginning. Then, it was a reverse Cinderella," says Richard Sergo, Eagle's chief operating officer. "Now we're saying we're going to be like Rocky."

Despite Sergo's upbeat scenario, it is still unclear whether the Herculean efforts that rescued Eagle over the past year were worth the trouble. Many analysts, noting the still crowded market as well as the persistent industry-wide sales slump, hold a pessimistic view of the company's future.

"It isn't that they can't make it," says Jan Lewis, president of the Palo Alto Research Group, a computer market analysis company in the Silicon Valley. "But there's still a lot of competition and they're not perceived as a stable company. . . . Businesses aren't going to want to buy a system and entrust their entire operations to it if they fear the company might not be around."

Room for Survivors

Adds Joseph Kapka, a computer company analyst for Bateman Eichler, Hill Richards: "There's always room for a few other survivors besides the big guys like IBM, Apple and AT&T. And maybe Eagle can find a niche. But the odds are against it. For the small players in this industry the party is basically over."

Not if Kappenman, who spent the last year restructuring Eagle's operations and negotiating with creditors that were owed nearly $20 million, can help it.

In mid-November, the company plans to unveil its latest machine, a high-performance, multiuser business system that could take the company out of its direct, and dangerous, head-to-head competition with IBM's popular personal computer and into a market where the opportunity for success is greater. If the company's marketing strategy for the new system works as planned, company officials say there is no reason why Eagle can't enjoy annual sales of $150 million to $200 million within two years.

Projections Revised

Nevertheless, Kappenman admits that early projections that the company would be profitable by late 1985 have been revised. The current timetable calls for Eagle, which lost $26.4 million in its 1984 fiscal year, to continue in the red until next year. Results for the 1985 fiscal year, which ended June 30, are scheduled for release later this month. Losses in the first nine months totaled $5.7 million on sales of $12.3 million.

"But at least we're still around," Kappenman says.

Although rescuing a company during a severe industry-wide sales slump is a sure-fire confidence booster, Kappenman is relying on more than Eagle's renewed morale to make it this time around. An ample source of help, he says, is the company's previous mistakes.

Founded in 1978 in a Santa Ana garage as the West Coast arm of a New Jersey company owned by Kappenman's older brother, the company floated along for a few years looking for a precise direction while it dabbled in computer making. The direction came in mid-1981, when IBM's introduction of its personal computer officially blessed the fledgling desk-top computer industry and spurred dozens of companies to introduce similar machines specifically designed to operate on IBM software programs.

Although Eagle was just one of a pack of companies making what the industry rather derisively dubbed "IBM clones," the company did well. By June, 1983 it had moved to high-visibility headquarters in the Silicon Valley and was ready to make its first public stock offering.

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