Datakor chairman and chief executive Nic Frangos makes a simple yet telling contrast of the problems facing his industry when compared with others.

“When someone upgrades to a bigger car the cost is higher, the car does more and the margin for the dealer is greater.

“But when they upgrade a computer, the new one costs far less, does much more and the margin is halved.”

The ability to deal with this kind of problem has sorted many men from the boys in the computer business.

Mr. Frangos says: “The barriers to entry in our business are falling and mavericks are inevitable.”

By the same token, buyers ought to be more aware of the risks. A good reputation is not built overnight.

At the heart of Datakor’s 32 operating units lies Unidata, arising from the Unisys acquisition by Mr. Frangos’ Mercedes Datakor in 1988.

“Not only did we immediately split Unisys from being a command-control monolith into 16 operating business units, we merged it with Mercedes Datakor’s operations.

“We have achieved spectacular results. We believe in decentralised management and have put in much effort to train people down the line. A former sales manager who now heads a division needs to know about costs as well as revenue.”

The upside is that instead of a handful of ideas going down the organization from the top, many surface from the ranks.

For example, one idea was the venture between Datakor and First National Bank to pay 400 000 rural pensioners through a biometric reader – an automatic teller machine that reads a thumbprint. It takes about 60 seconds to pay out.

“Pension day is like a fun day now instead of a two-day trial,” says Mr. Frangos.

Not every idea is a winner. Datakor spent R45-million on strategic development in the year to March 1992, but wrote off R25-million of it.

“The acquisition of Cortech cost us about three times what we expected. But it has brought us a substantial contract with the Weather Bureau.”

Will it improve the television weather forecasts?

“That’s the whole intention. In America, the forecasts are amazingly accurate for up to five days ahead because they interpret all the input data properly.”

Another Datakor star is software division Compusons, which distributes the products of international giant Computer Associates.

Mr. Frangos says the key to staying ahead is to anticipate customers’ needs. “You also need great products.”

The tough economic climate and the high earnings base limited the climb in Datakor’s attributable income to 12%. It made R40-million from turnover of R679-million. The group had net current assets of well over R100-million at March 31, almost half in cash.

The shares at 290c – more than treble the net asset value – are a rand below their February peak, on 10 times historic earnings.

If Mr. Frangos’ expectations of improved profits are achieved, there is much potential at this price.

Other links of interest
Nic Frangos :: Home Page
Nic Frangos :: on squidoo
Nic Frangos :: Article on blogspot
Nic Frangos :: Article on Newsvine
Nic Frangos :: Article on review-inc
Nic Frangos :: Article on 800review