Firm makes products that have expired


October 07, 1991|By Steve Kaufman | Steve Kaufman,Knight-Ridder News Service

SAN JOSE, Calif. -- In Silicon Valley, where new generations of products are introduced every 18 months, you might suspect that aging computer equipment attracts as much thought as a 1960 Rambler.

True, some computer manufacturers think this way, especially if they're small, and short on resources.

But their customers view the matter in an entirely different light. They don't buy hardware with the thought of replacing it each time technology improves. They resent companies that don't provide long-term support.

Nobody appreciates this better than Robert Steinberg, president and co-founder of Iicon Corp., a small Morgan Hill, Calif., company that specializes in providing a new manufacturing and marketing channel for high-tech products that have officially expired. It prospers only because some computer manufacturers treat their aging gear with benign neglect.

"Silicon Valley companies compete based on their new products, not their old products," Mr. Steinberg says. "But when a company abandons a product, it leaves a bad taste with customers."

The genesis of Iicon dates to 1985, when Zilog, the Campbell, Calif., semiconductor manufacturer, decided to divest a family of microcomputers and concentrate solely on the chip business. The computers included expensive, multi-user systems as well as simple personal computers, and Zilog thought hard about the wisdom of leaving its customers in the lurch. Given that Zilog was then owned by Exxon, which had an office systems division, the prospect of a complete divorce seemed devastating.

When Mr. Steinberg and Dan Crandall, a Zilog manager, offered to start a business to continue the computer line, Zilog jumped at the opportunity. Iicon still produces the Zilog line, plus 25 other products once supplied by three other manufacturers. Annual sales, which started at $180,000 in 1985, have grown to more than $2 million.

Mr. Steinberg says he believes Iicon can eventually generate $10 million in business. Its biggest customer is the federal government, which tends to keep buying stuff it likes, obsolete or not. Since 1986, for example, Iicon has sold the Internal Revenue Service and other federal agencies $300,000 in now-defunct Cygnet Technologies voice-data telecommunications systems.

Even technology purists tend to keep computers far longer than commonly perceived. Engineers usually keep workstations for up to five years, and companies stick with bigger multi-user computers for about seven years.

"Businesses buy these computers with particular applications in mind, not power," says Curtis Myers, a Silicon Valley sales and marketing veteran and now a general partner at Vanguard Associates, a Palo Alto, Calif., venture capital firm.

"They're not going to junk the computer in three years just because another model packs more speed and power."

Computer companies would be wise to listen. Those not committed to supporting older products may discover that their business keeps dwindling in these tough times.

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