Power to the People

With its cheaper, faster Macintosh clones, Austin’s Power Computing hopes to bring the high-tech revolution to the masses.

TUCKED IN A CORNER of a hangarlike space along North Austin’s high-tech corridor, fewer than a hundred dedicated techno-nerds spent most of last year logging eighteen-hour days at used metal desks. Short on sleep and wired on Diet Coke, they scurried about in a warren of cubicles, trying not to be distracted by the banging on the assembly line on the other side of the building or the chatter from the telemarketers upstairs. The walls were bare, the floor was concrete, and amenities—like windows—were nonexistent. There wasn’t even a sign on the door.

Yet out of these spartan surroundings came one of 1995’s hottest high-tech launches: Power Computing, the first company to manufacture and sell Macintosh clones under license from Apple Computer. Just as two other Texas companies, Compaq and Dell, came from nowhere to dominate the market for IBM clones in the eighties, Power hopes to do the same for Macs in the nineties, and already it is off to an impressive start. Last spring a skeleton staff introduced three inexpensive Mac clone models and, a few months later, rolled out another clone that is faster than anything Apple has ever offered—all to rave reviews from industry bibles like MacUser and InfoWorld. By this summer, Power will have shipped 100,000 personal computers, nearly twice as many as Compaq shipped in its first year.

Power’s arrival on the scene comes at a fortuitous time. The success of Compaq, Dell, and others in marketing knockoffs of IBM PCs suggests that consumers care more about what a computer does than who makes it—they’d rather pay less for a machine that performs the same functions. Yet the demographics of the clone market have changed. In the eighties most young computer buyers had grown up with IBMs, so it made sense to clone IBMs. Today most young buyers have grown up with Macs, so Power is well positioned for a sales boom. Another factor in Power’s favor is the war between Apple and the increasingly dominant “Wintel” camp ( PC makers that use Microsoft’s Windows software and the Intel chip). Apple is desperate to maintain and expand its market share—which includes sales by its licensees—so it will do whatever it can to help Power prosper.

Of course, good timing would mean nothing were it not for good management—and that means CEO and president Steve Kahng (pronounced “Kong”), a moonfaced 46-year-old native of South Korea. An engineer by trade, he displays none of the brash arrogance of many entrepreneurs, but he is clearly a savvy businessman. For one thing, at the same time that he was negotiating for the license with Apple’s executives, he was raiding its top talent. Half of the eighteen engineers at Power’s outpost in Cupertino, California, are Apple defectors, including vice president of engineering Jon Fitch and his deputy, Carl Hewitt, two key architects of Apple’s Power Macintosh line. “Apple has a lot of engineers,” Kahng says in a heavy Korean accent. “Nine or ten isn’t that many.”

Kahng has also turned Power Computing into a magnet for young, talented Mac lovers eager to get in on the ground floor of a new venture. Hewitt is only 29. Marketing director Michael Rosenfelt, who held the same position at a Kansas City—based start-up called APS Technologies, is 28; a University of Texas at Austin dropout, he talks at only one speed—fast forward—and preaches about Power’s mission to bring the Mac to the masses. The chief of operations, 29-year-old Ric Ralston, also came from APS, where he had set up that company’s technical-support, product-development, and customer-service operations. Brian Combs, Power’s 26-year-old on-line evangelist and Webmaster, is a high-tech hero who created the popular Austin City Lim-its Internet site. These and other rela-tive youngsters serve as Mac mentors for Power’s grown-ups, many of whom are veterans of IBM clonemakers like Compaq, Tandy, and Digital Equipment Corporation.

Perhaps Kahng’s greatest strength as a manager, though, is his tightfistedness. “It’s no secret that Steve is a skinflint,” says Henry Hirvela, Power’s chief financial officer. Indeed, although Kahng is a multimillionaire, he lives modestly—he dresses mostly in polo shirts with the red-and-black Power logo—and expects his company to do the same. The whole reason he put down roots in Austin last February, he says, is that “California is too expensive.” The city won out over Portland, Oregon, because with companies like Apple and Dell already doing business here, a less expensive infrastructure was in place for manufacturing Mac clones and setting up technical-support and mail-order operations. And Power’s unglamorous first home in Austin—an unused corner of struggling IBM clonemaker CompuAdd’s factory floor—came rent-free. “Research and development is a priority,” Kahng says. “Fancy offices are not.” He jumped when CompuAdd’s CEO, Rick Krause, offered space and labor to Power in exchange for a fee for every clone that rolled off the assembly line. It meant that Kahng could spend his start-up money to pay top engineers rather than build a plant and hire an assembly crew.

Power’s employees love to swap stories of Kahng’s penny-pinching ways, like the time Hirvela came to Austin for his job interview. Instead of springing for a hotel room, Kahng insisted on playing host at his place: a two-bedroom apartment near the Arboretum shopping mall. “Steve neglected to tell me that he didn’t have a bed,” recalls Hirvela, who ended up sleeping on the guest room floor. Then there’s Kahng’s car, a wheezy 1984 Mercedes with more than 215,000 miles on it. To draw attention to Kahng’s frugal ways, the company tried to raffle it off last year at an industry trade show. (The winner took a computer instead.) Employees travel in pairs to take advantage of friends-fly-free discounts. Until last summer they all shared Kahng’s business cards—crossing out his name and substituting their own.

Yet Kahng’s cost-cutting doesn’t mean he’s unwilling to part with his money. “Steve spends huge amounts where it makes sense,” says Geoffrey S. Burr, Pow-er’s vice president of sales and marketing, noting that Kahng has already poured more than $10 million

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