How business, doctors and journalists prey on your food anxieties I

i 1_
Comdisco
I
9
1 ~
!ohn Vos :cky, chiettinancial officer cf Comdisco
Slevin counts on his cleverness to boost earnings.
ein. "I need a lot more help ."
A good deal ofhelp is coming f om
John Vosickv, Comdisco's able chief
financial or'Fcer . A former Peat Marwick
CPA, Vosicky joined Comdisco
the same vear Slevin did, <strong>and</strong> the two
work %vell together .
Vosicky is a clever man with a profit
<strong>and</strong> loss starement . When Pontikes
died last }°ear his insurance policy paid
Comdisco S20 million . Rather than
designate it as an extraordinary item,
Vosicla lumped it into Comdisco's
$§ 7 million in other revenues . He also
apparently has thro cn into other revenues
some S21 million in proceeds
from the sale of stock <strong>and</strong> warrants
held by Comdisco in Cadence Design
Svstems .
Comdisco still holds another $20
million or so in unrealized gains on its
Cadence position . Presumablv Vosickv
can harvest them whenever the
company's earnings or cash flow need
a boost-%ehich rheyare likely to need
in the next few vears .
An example of Vosicky's cleverness
is Comdisco's Venture Leasing division
. This 12-person operation leases
to startup companies <strong>and</strong>, in exchange
for accepting the extra risk
involved, dem<strong>and</strong>s wan-ants in the
companv as a sweetener-answhere
from 6% to 12% of the deal . This
<strong>business</strong> accounts for only about 550
million in lease deals per year, but if
the startup takes off, the profitsspeculative
though thea are-can be
enormous . Clients of this Comdisco
division haveincluded Sybase, Cyrix
<strong>and</strong> Svnopsis, <strong>and</strong> its current portfolio
includes over 250 startups .
As long as there are unrealized
profits in this portfolio, Vosicky has
the flesihitiw to realize them as he
needs to give Comdisco's profits a
boost . Comdisco recentlv told venture
capitalists that it would double its
leasing commitments to startups to
Comdisco wants to become a
high-tech service company. Is
Jack Slevin the man to run
this tricky transition?
5100 million a year . Comdisco
doesn't break out earnings from this
division, but FolutES believes that in
1994 at least 315 million of Comdisco's
S159 million in pretax profits
came from cashing in warrants in this
portfolio .
Comdisco is now willing to finance
riskier szat-tup deals <strong>and</strong> even throw in
additional financing . In IMay it committed
to leasing S1 million worth of
equipment to Boulder, Colo . startup
BioStar Inc .-maker ofa rest for strep
throat-<strong>and</strong> in addition bought S2 .5
- million in BioStar subordinated
debentures .
Profits, ofcourse, are profits, <strong>and</strong> as
long as technology stocks are strong
<strong>and</strong> Comdisco's judgment sound,
these lease-sweeteners bring in real
cash . But thev are not quite the same
thing as a dependable earnings flow,
Nor is the companv's recent effort to
grow its earnings through an aggressive
stock repurchase program .
A more immediate worry for Jack
Slevin is a recent exodus from the allimportant
sales force . In the last 18
months at least three dozen salespeople
have left out of a total force of
some 130, manv defecting to rivals
like GE Capital . ~S'hile Comdisco has
been cutting commission schedules
<strong>and</strong> raising sales quotas, Ga Capital
has been offering sign-on bonuses
<strong>and</strong> guaranteed contracts .
One reason commissions have dcdined
is a change in Comdisco's
product mix . Comdisco is leasing
more res for client-seraer netnvorks .
Of the $1 .6 billion in new leases
Comdisco wrote last year, 14% were
personal computers, up from 10% the
year prior, while mainframe leases
dropped from 44% tuo years ago to
33% last year .
linlike mainframes, which can cost
$20 million, desktop computers are
leased bv the *-hous<strong>and</strong> <strong>and</strong> cost
around $2,500 new . Their residual
value drops quickly <strong>and</strong> remarketing
margins are thin-hence, skimpier
commissions .
Comdisco now leases other equipment-such
as CAT scanners, semiconductor
manufacturing equipment,
tape drives <strong>and</strong> cash registersbut
these, too, are highly competitive
<strong>business</strong>es, some with thin margins .
In the ticklish situation Slevin finds
himself in, the last thing he needs is
outside distraction . <strong>How</strong>ever, he may
be facing it . A black former Comdisco
salesman is suing the company for
alleged racial discrimination <strong>and</strong> has
identified Sievin as one of the main
offenders . Regardless of the merits, a
trial could be embarrassing to Conr
disco, since it would reveal in a bad
lighe the good-old-boy, macho atmosphere
that has always prevailed in its
sales organization (see box, p .83) .
There are days when Jack Slevin must
wish he were back on the road selling
leases again. ~
86
2046673344
Forbes . August 14, 1995
http://legacy.library.ucsf.edu/tid/agf97d00/pdf