Canadian entrepreneur series
By Geof Wheelwright
Seanix Technology Corporation has survived its first year in the United States and is alive to tell the tale. The company says in March of 1998, the U.S. operation began making money.
While Seanix isn't saying how much it made in the U.S., it does boast of achieving annual sales of $100 million in 1997. It employs more than 260 people and says it ships 25,000 PCs per month.
Seanix chief executive Paul Girard
According to company chief executive officer and founder, Paul Girard, survival alone is a major achievement in a market where previous attempts at establishing a direct sales beachhead-many by much larger companies-have failed miserably.
"It [the U.S. operation] is making money. It is marginal at this stage, but we are confident that we will be quite successful," he says. "In hindsight, it is doing as well as we can expect. At the beginning, we underestimated how difficult it was to succeed, and we are operating a different business model in the U.S. [direct sales versus the reseller and retail channel in Canada]. Selling direct is different. The PC market in the U.S. has also been changing quite a bit [with the introduction of sub-US$1,000 PCs]."
Girard says, however, that in Canada Seanix is enjoying a steep increase in sales, and the company is reaping the benefit of a "vertically integrated" design and manufacturing operation. Unlike many other PC clone makers, Seanix actually designs and manufacturers most of its own base-level motherboards, rather than buying them from chipmaker Intel or any of the dozens of Taiwanese suppliers.
"In Canada, we are growing quite well with more than 50 percent annual growth," he says. "We have achieved the landing of a lot of major accounts and we are seeing a growing business in education and government. These are areas where we have significant growth potential as a federal government certified supplier.
"We have also been expanding the product line to servers and notebooks. We are developing our own server technologies, although we still use a third-party supplier on the notebooks. We are developing server products that have strong features and lots of expandability. It is a huge margin business and if we sold servers at some of the prices that some of the larger vendors do, we would be making 60 percent margin. So we are feeling really pumped about opportunity."
One opportunity he is not quite so sure about-at least in the short term-is that presented by Intel's release of its Pentium II-based Celeron systems for the entry-level market in Canada. He suggests it will take the Canadian market longer to move to Celeron-based systems, than those based on classic Pentium processors with MMX technology.
"The Canadian market is different from the U.S. market to some extent. We have to be cautious from that point of view," he says. "But Intel has been a very successful company over the years and delivers 50 percent plus more performance for the price every year-year in and year out. We expect that [eventually] it will be successful [with the Celeron] and that in two or three years people will not think twice about [buying Celeron systems]."
Girard says part of the problem lies in the higher cost of moving to motherboards that use the Slot 1 configuration of the Pentium II, rather than the more established Socket 7 design of the Pentium.
"We have to take a long term view of that. I think that Slot 1 will be very successful but in the short term Socket 7 is more cost effective in terms of board cost," he says. "It is particularly relevant in Canada because with the Canadian dollar at its current exchange rate and customers in Canada wanting buy a PC for $1,000 Canadian, not US$,1000, the life of Socket 7 in Canada is potentially longer."
None of this is to say, however, that Seanix will not move to Celeron as soon as it sees demand for the technology.
"We are ready for Celeron to go anytime," he concludes. "Right now, the Celeron 266 MHz without Level-2 cache is an issue, but Intel is dynamic and competitive and planning to roll out 300 MHz Celeron without cache and then integrate it later on in the year. Intel is going to succeed, but it is a question of time. In terms of today, I think Socket 7 still has a life."
So far, none of this has tempted Girard to move away from Intel processors in any of his systems.
"We have been 100 percent Intel for as long as I can remember," he says. "We study alternative processors and particularly we need to consider how we address the $1,000 PC market but it is a question mark in terms of whether Celeron will be able to address that in the short term. The $1,000 market in Canada is difficult to achieve."
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