Leading Edge's dethroned founder tries to re-enter industry


May 06, 1991|By Ronald Rosenberg | Ronald Rosenberg,Boston Globe

NEWTON, MASS. — Newton, Mass.--Michael Shane, the controversial one-time king of computer clones, is back.

This time around, he wants a little respect. And a second chance.

"I want the credibility that is commensurate with my abilities," said Mr. Shane, who became famous for producing incredibly low-cost knockoffs of IBM's personal computers at Leading Edge Products Inc. "I don't want to be perceived as this greedy businessman."

Mr. Shane started his new company, Model American Computer Corp. in Newton, 13 months ago after Leading Edge crashed and burned, leaving behind a messy bankruptcy case and a lot of angry personal computer retailers. He started Model American with about $2 million in seed capital from a handful of private investors who were willing to take a chance on him again.

He figures he needs another $4 million by June 30 if he is to continue expanding the company.

But money is tight.

"I knew this was going to be a hard comeback."

Why? "Credibility. [I have] no credibility in the city," Mr. Shanesaid.

Michael Shane is no ordinary entrepreneur. As a college freshman, he used to drive around Boston selling wigs out of the back of his car. Four years later, he sold the business for $1 million.

Blue jeans were next. It was the early 1970s and blue jeans were in. Mr. Shane hit upon the idea of selling prewashed jeans and sales at his company, Faded Glory Jeans, were approaching $55 million within three years.

By 1979, Mr. Shane had discovered computers. He built and lost a fortune in the 1980s as the founder of Leading Edge, once the runaway leader in low-priced, imported IBM-compatible personal computers. He estimates that in five years he sold $480 million worth of personal computers and built a reputation as the "king of the clones."

But when he couldn't deliver the hot-selling computers that retailers paid for in advance, the business collapsed. Dealers who had become millionaires and called him a visionary turned against him, forming a creditors committee that claimed he owed them $16 million. That was 26 months ago.

"I have made more mistakes than anybody who has ever started a business," Mr. Shane said. "A good businessman is always judged by one thing: How much money he makes. . . . I haven't been a good businessman, it's true. . . . These last two years have been very difficult."

It's been a long way back for Mr. Shane. He said he hit bottom in April 1989 when he lost his condominium in The Gables, a fancy development, and he had to move in with his younger brother, and his wife and baby had to stay with her parents in New York.

"We absolutely didn't have a place to live," Mr. Shane recalled. His brother eventually lent him the first month's rent and a security deposit that allowed him to rent a modest two-bedroom apartment.

Today, Mr. Shane and his wife have just bought a new place in Newton, a Boston suburb, and he believes he can make his new company everything Leading Edge was -- and more. For one thing, the new Mr. Shane is far more humble than the old Mr. Shane.

"We're trying to do the right thing. Maybe we didn't always try to do the right thing. But we're trying now," he said.

Mr. Shane said he has learned from his mistakes.

While he said many of Leading Edge's problems grew from being squeezed by his Korean supplier, Daewoo Telecom Ltd., this time he is assembling his computers in his own plant in Marlborough, Mass. His motto: "Bringing Vision, Value & Jobs Back to America."

And acknowledging his weakness at running a company, Mr. Shane has turned over operations to Jeffrey C. Shuman, an associate professor of management on leave from Bentley College in Waltham, Mass. Where Mr. Shane is gruff, Mr. Shuman is polished, careful to explain details.

Mr. Shane said he has shipped about 3,000 machines through 400 dealers nationwide. The brisk sales volume, say some dealers, is largely due an impressive price -- $2,495 for the high-end system -- and sought-after features. These include an Intel Corp. 80386 processor running at a zippy 25 megahertz, 4 megabytes of internal memory, a 120-megabyte hard drive, a built-in fax-modem board, Microsoft's Windows and a one-year, on-site service support contract. He also packs an American flag with each machine.

"Michael is in tune with what the market wants," said Ralf Bzura, president of General Computers, a 13-store chain in Tamaqua, Pa., which has sold 600 Model American machines since last fall and personally invested "between $50,000 and $100,000" in Model American.

Added John Taber, president of Metroserve in Cambridge, Mass., "Michael has always had good products and good support. I know some dealers felt they were mistreated, but it depends on how much money they lost. I lost $5,000 but I also had a volume of $500,000, so I made a lot of money. So $5,000 is the cost of doing business."

But not everyone agrees. There is still considerable residual animosity toward Mr. Shane.

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