Minnetonka company is going outside the white box

  • Article by: STEVE ALEXANDER , Star Tribune
  • Updated: October 7, 2012 - 7:22 PM

Equus, one of the few makers of off-brand computers, is branching out.

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Jon Pollock, vice president of marketing and product management, and Andy Juang, CEO, at the Minnetonka headquarters of Equus, which is positioning itself to be a player in Internet video streaming. Netflix is its first big account.

Photo: Marlin Levison, Star Tribune

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Equus Computer Systems is one of the nation's largest PC companies that isn't a household name.

But that might change a bit. The Minnetonka company, which has long built off-brand PCs, is branching out after teetering on the brink of extinction during the recession.

Now Equus is making server computers for data centers, including cloud computing operations. It recently built high-performance servers for movie rental giant Netflix to stream movies to viewers over the Internet.

That's a big change for a PC and storage device company whose products carry such little-known brand names as Nobilis and Nobistor, and are called "white boxes" in the computer industry.

A white box is a no-name computer that performs as well as a name-brand unit made by Dell, HP or Toshiba, but usually is cheaper. Equus is one of the nation's largest white-box computer manufacturers, one of a handful that survived the Great Recession, when small- and medium-sized business customers quit buying.

"Equus is one of the last white-box makers left in the U.S.," said Bob O'Donnell, an analyst at Massachusetts-based research firm IDC. "Years ago there were hundreds of these little mom-and-pop PC companies, but only a few stood out, and Equus was one of them. Now a lot of the others have gone away."

One reason is that it's no longer possible to sell white-box computers at substantially lower prices than brand-name products.

"The prices for all desktop PCs have really come down dramatically, and it's difficult for corporations to get lower price points from white-box makers," O'Donnell said.

White-box makers are lumped with smaller brands in a market segment typically called "other" that represents 24 percent of the U.S. market for PCs, O'Donnell said. Equus executives say white boxes are about 10 percent of the market.

After laying off about 50 people since 2007, Equus now employs about 200 workers, including about 70 in the Twin Cities. CEO Andy Juang, who co-founded Equus in 1989, worried the company might not survive the Great Recession.

"It was touch and go," Juang said.

Juang, 53, is from Taiwan. He earned a master's degree in computer science from the University of Houston, then moved to the Twin Cities in 1985 to work at supercomputer firm Cray Research.

Juang started Equus as a Pony Computer franchise with partner Joseph Chou. Juang bought out his partner's interest and renamed the firm Equus in 1991. While the firm's manufacturing moved out of state for business reasons, Juang kept the headquarters here.

"My family was raised here, and we prefer the cold weather," he said.

Equus is positioning itself to be a player in Internet video streaming, with Netflix as its first big account. Earlier this year, the firm opened an expanded manufacturing plant in the Los Angeles area. It also has operations in Chicago, Dallas, Seattle and Kansas City, Kan.

The company also has started other business initiatives, such as reselling AT&T smartphones and tablet computers to business customers, providing online storage capacity to corporations and managing corporate computer centers.

But the company's bread and butter remains computer production. Its computers aren't sold in retail stores, but through independent dealers like Erickson Technologies, a 32-employee Eagan computer firm that caters to dental offices. Equus customizes computers for Erickson with specific processors, hard drives and memory chips that are optimized for dental office software. In addition, Equus maintains an inventory of those computers in the Twin Cities so that Erickson can get same-day delivery.

"We like the quality, the availability and the business relationship with Equus," said Jeff Erickson, the reseller's vice president of sales. "Customers can go anywhere and buy a Dell computer. When they come to us, we sell them Equus computer reliability, and we put our own name on the computers to promote the Erickson brand name."

Looking for better margins

Equus sells computers for 10 to 30 percent less than name-brand units, but margins are thin on some products, including its new lightweight laptop, said Jon Pollock, vice president of marketing and product management. As a result, Equus is expanding into the more lucrative market for servers that cost up to $25,000.

"The PC business is a cutthroat market, and there's not a lot of margin there for someone to grab," said Craig Stice, an analyst at California research firm IHS iSuppli. "The server market is more lucrative, and I can see that as a goal for white-box manufacturers."

Pollock said about 50 percent of the company's current sales are servers, and he expects the share to increase. And, as a small company, Equus aims to quickly adopt new technologies and offer custom configurations.

"We can give customers the latest and greatest technology, many times six to 12 months before they could get it in standardized products from larger companies," Juang said. "And we can give them consistency. Companies such as Netflix want each machine to have the same configuration to simplify the management of their data center."

Privately owned Equus doesn't disclose its financial details. Annual shipments are in the hundreds of thousands of computers, vs. millions for the big computer makers. Juang said Equus has revenue "in the range of $100 million annually" and has been profitable since 1989.

"It's hard for us to compete with HP and Dell on commodity products," Juang said. "That's why we're looking for niche markets we can focus on."

Steve Alexander • 612-673-4553

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