Proving that the federal government can be a welcome harbor in a turbulent industry, a newly awarded Navy contract potentially worth $100 million may have rescued a local personal computer company from the jaws of bankruptcy, according to both government and industry sources.
Seequa Computer Corp., a seven-year-old Odenton-based manufacturer of IBM-compatible personal computers, had endured both layoffs and millions of dollars in debt as a victim of the shakeout that has wracked the personal computer industry over the last year. The company, which would not comment on its financial situation, reportedly has been negotiating with creditors to extend payment schedules and convert its debt into equity. A planned private placement also has not gone through.
"They were in dire straits," said Terry Miller, president of Government Sales Consultants Inc.
However, their prospects brightened when Seequa teamed up with Federal Data Corp., an aggressive government computer contractor, to bid for a potentially lucrative contract to provide IBM-compatible computers and related equipment to the Navy and Air Force.
Competing against five other companies -- including Sperry Corp. and Zenith Data Systems -- Federal Data Corp. earlier this month won the right to sell the IBM-compatible hardware and software to the services for the next three years.
"It was a gutsy bid," said Miller. "They stand a chance to get hosed if people don't order enough machines in the first year" because the price of the machine dramatically drops over the life of the contract.
As a prime subcontractor, Seequa would be called upon to build up to 1,000 of its Chameleon XL computers for Federal Data per month as the basic system. The Seequa units comprise about one-third of the potential $100 million contract.
However, says Capt. Raymond Chalupsky, commanding officer of the Navy Automatic Data Processing Selection Office, there were concerns that Seequa wasn't financially or physically able to meet the requirements of the contract. He said that, as prime contractor, Federal Data provided "a contingency plan" that would enable the company to continue providing the machines even if Seequa went out of business. He characterized that sort of subcontractor contingency plan as unusual.
"Contingency would not be the word I would use," said Larry Smith, Federal Data's vice president for federal systems marketing. "The Navy asked us to provide information, and we proved we will be able to meet our requirements. We don't have any problems with Seequa."
Smith declined to comment on reports that Seequa's financial situation is still difficult and that one reason Federal Data was able to low-bid the contract was that Seequa was willing to make significant price concessions to be a part of the bid.
Nor would he comment on information that Federal Data had acquired manufacturing rights from Seequa so that even if the personal computer company goes out of business, Federal Data easily would be able to turn the computer plans over to another manufacturer.
Partly because of its new government contract, there are now a swirl of rumors that Seequa may be acquired by either Televideo Inc., another personal computer company, or Teledyne Inc., the multibillion-dollar conglomerate. None of the companies would comment on the reports.
Whether those rumors come true, there is little question that turning itself from a commercial vendor into a government contractor has extended Seequa's lease on corporate life. Seequa's market shift underscores the industrywide trend for personal computer companies to focus on selling to special market niches rather than compete in the broad retail and corporate market now dominated by IBM.
"I don't think anybody in the industry thinks they would have survived without this," said GSCI's Miller.