Smaller companies: Riding high on a rush of adrenalin

American shares like Microsoft, Hewlett-Packard and Intel are moving ahead again, suggesting a new lease of life for the hi-tech bull run. In the UK successful manufacturers of hardware and software are relatively rare birds; but there are some exciting service companies feeding off the boom.

Two which look particularly exciting are Ideal Hardware, at 598p, a supplier of computer storage products, and newly floated MSB International, at 234p against an issue price of 190p, which provides contract personnel with IT skills. Both companies are gaining share in markets with high growth rates.

Distributors of computer-related products like Ideal have to run fast to stand still because prices of the goods they supply are falling so fast. Price wars have become endemic but, rather like dogs fighting, seemingly ferocious confrontations inflict only minor wounds. Relentless pressure on costs, new products and dramatic volume gains mean that well- run companies can absorb heavy price cuts while maintaining margins and driving sales and profits steadily higher.

But to succeed in such an environment the successful companies have to be quick on their feet in ways undreamt of by earlier generations of British businessmen. Ideal was founded in the early 1980s by 34-year- old businessman James Wickes, who realised that as the computer revolution unfolded there would be huge demand for products such as disk drives. The only hiccup came with a near-disastrous flirtation with the fax-modem market. Lessons were learned and the Ideal which emerged from that debacle was a formidable competitor which now dominates the data storage wholesaling market with a near-25 per cent share.

The company is a far cry from traditional ideas of distribution businesses. The atmosphere is like the dealing floor of a big City firm. Ideal has over 60 salesmen who spend all their time on the phone talking to clients and doing deals. They are paid on a commission-only basis: star performers enjoy six figure incomes.

However, the approach is based on service rather than a counter-productive hard sell. Ideal makes a huge effort to keep staff and customers abreast of the latest developments in a world where there are 200 new products hitting the market every week. As well as the traditional hard-copy catalogue and an in-house magazine, the group supplies customers with a catalogue on CD-Rom with 35,000 pages of information including interactive-video demonstrations. It even has its own in-house TV station which broadcasts weekly to 500 key customers with programmes including new-product announcements and interviews with key industry figures.

A dedicated sales force and user-friendly information gives the group a competitive edge. Not surprisingly Ideal is regarded as a key supplier by global manufacturers of data-storage products and has close ties with resellers. Profits are expected to move ahead from pounds 6.1m last time to pounds 7.5m in the year ending April 1996 and pounds 9.5m-plus for the current year. That implies a prospective p/e multiple of around 20; not dear for such a well-run and fast-growing business.

MSB has an advantage over Ideal in that the product it supplies - highly qualified computer personnel - is unlikely to suffer price erosion. The company is the vehicle for an energetic 32-year-old, Mark Goldberg, who says he is a great salesman but is less sure about running a business. MSB effectively went bust under his leadership in the early 1990s and was relaunched with the aid of two businessmen, Nick Parker and Peter Flaherty; the latter is now joint managing director with Goldberg.

The combination of flair and cool business acumen is producing spectacular results. Since 1993 sales have grown from pounds 7.4m to pounds 38.6m, with profits up from pounds 504,000 to pounds 3.4m. They are forecast by one stockbroker to reach pounds 5.5m this year. The supercharged progress reflects a combination of sales drive and service. The 46 salesmen on MSB's dealing floor are organised in teams with a resourcer (to check availability of contract staff) and a team leader to help the sales staff who may have been estate agents in a former life. Good salesmen can earn pounds 60,000 a year; team leaders make pounds 90,000 and divisional heads, responsible for three teams, make pounds 225,000. This, plus Monday meetings to set targets and Thursday meetings to assess results, makes for an adrenalin- charged atmosphere.

But the service has to match the sales pitch. Contractors are checked not by interview but by taking references from three companies. Sales staff and resourcers spend evenings and weekends talking to their contractors to make sure that when they offer their services to clients (a Who's Who of large British companies and facilities management groups) that the contractors really are available.

MSB now has 900 contractors, against 450 a year ago, and wants to become the UK market leader overtaking its biggest rival, Delphi, with 2,200 contractors and itself growing fast. If MSB achieves its goal the shares will rocket.

Start your day with The Independent, sign up for daily news emails
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Digital Optimisation Executive - Marketing

£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Day In a Page

Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at long last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific