Turtle crossing Featured

8:36am EDT January 24, 2005
The warning sign at the entrance to the Skokie-based corporate headquarters is a visitor's first clue to the management style of Forsythe Technology Inc. founder and chairman Richard Forsythe. It reads "Turtle Xing," and features a picture of the famously restrained reptile.

"I've got turtles all over my office," says Forsythe, founder and chairman of the company. "Aesop was an old Greek philosopher in 400 B.C., and he wrote, 'Slow and steady wins the race.' It's a tough sell sometimes, but I really believe it. I'm running a 2005 technology company based on his principles."

The 33-year-old company that was started with $100 has grown into a $444 million enterprise with 600-plus employees and 35 offices across the country. With a company that large, Forsythe admits it is sometimes a challenge to remain true to his steadfast approach.

"I saw too many guys jump out ahead and make the quick buck, and I felt like such a schmuck," Forsythe says. "And all of a sudden, the next day, I found them on the street looking for a job, and I still had one."

Forsythe's philosophy has kept the company, comprised of four separate divisions, steadily growing by accommodating customer needs and adding services only when the markets were ready.

"We provide the business value of IT, which means nothing to anybody, I guess, but when you sort it down to the bricks and mortar, we make money by putting smart people in front of customers to do technology consulting services like showing them how to secure their networks or how to consolidate their servers or how to do disaster recovery work, how to assess their current environment and how they could do it better, how to control their maintenance costs, things like that," he says.

Forsythe Technology has four wholly owned subsidiaries -- Forsythe Solutions Group Inc., a consulting and reselling business; Forsythe McArthur Associates Inc., the leasing part of the operation; Forsythe Biotechnology Group Inc., a two-man start-up focused on biotechnology companies; and National Business Group Inc., which focuses on the security space.

"I told somebody the other day, the reseller business, by itself, is an OK business, not a great business, and the technology consulting business for a company of our size -- we have maybe 150 consultants -- it's an OK business," Forsythe says. "But you can't drive a lot of German cars with the money you make off a company that size. The leasing business has been in the pits the last couple years, with low interest rates and people not really investing a lot. It used to be a great business. I think it will be a great business again, but right now it's kind of in the doldrums.

"Standalone, any of these businesses are ho-hum, but you put them together, you bundle them together, and you've got a real nice business. And it's somewhat unique."

It was developed over several years by listening to customers.

"The technology business changes like the wind, and you've go to change with it," Forsythe says. "It's tough to find the magic answer and just sit with it for 20 years. The industry won't let you do it. We started out as a broker of used IBM computers. Then we started to lease them, and we did that for a long period of time. We branched into different kinds of things. Then we pioneered the leasing of IBM terminals. And then, one day, things started to change. IBM started to come out with their own leasing company and started to bundle things with their mainframes, and we went, 'Oh, boy. Look out. Dark clouds on the horizon.'

So the company started exploring opportunities to represent other companies.

"We started with Hewlett-Packard. Hewlett-Packard didn't want a leasing company representing them. They wanted a company that had the ability to help their clients figure out how to solve business problems and that kind of stuff. So, we started Forsythe Solutions and we hired propeller heads who knew Hewlett-Packard equipment, and they authorized us to do business in a certain region. And as soon as we convinced all the Hewlett-Packard people in that region that we were OK guys, we could do what we do, we said, 'How about another region?'"

It's a model that is difficult to replicate, Forsythe says, because it takes a very long time develop. But the approach is reflective of Forsythe's slow-and-steady-wins-the-race philosophy.

That approach, which carried the company through the dot-com boom and bust, has its drawbacks. At the same time the Internet revolution was blossoming, many companies were concerned about Y2K.

"We benefited from it in that we sold a lot of servers to people," Forsythe says. "But we were scared to death of it. We walked away from tens of millions of dollars of orders from wonderful companies that wanted us to guarantee that all of these new machines from all of these great vendors were Y2K compliant. We wouldn't do it. We said, 'If IBM says it is, you'll have to take their word for it.' They wanted consequential damages."

As it turned out, the Y2K scare was just that -- a scare.

"It was all B.S.," Forsythe says. "Everything ran. I didn't hear anybody going down because their computers were goofed up. Everything was fine. Everybody went out and bought all this new equipment because they weren't sure the old equipment was going to work. The old equipment worked fine, but they bought the new equipment from us. That basically created a new bubble era; people bought more capacity than they needed."

But being cautious in the marketplace does not mean being reactive.

"We try lots of new things; some of them have worked," he says. "One that has worked very well is the area of maintenance. As these computers get cheaper and cheaper, you still have to maintain these dudes, and those maintenance contracts can add up to be 20 percent of the annual hardware budget. And nobody pays any attention to them.

"We have done work for companies where we found they're paying maintenance on machines they haven't had for three years. They're using mission critical machines that they don't have maintenance on, and they're out of control. That was an area where they'd say, 'You're right. We ought to get our arms around that. We'll do it tomorrow.' And nobody ever did."

Forsythe Technology sold $100 million in maintenance contracts last year.

Acting public

Even though Forsythe Technology is a private company, it recognized early on the value of sharing information with customers.

"We were a small company, and we were competing with people like IBM and Comdisco, which was a public company, and others of that ilk," Forsythe says. "And they were saying to the customers, 'Hey, look at our statements. Do business with a credit-worthy, solid company. How do you know who these guys are? They don't even have an annual report.' So we said, 'We better put one together.' And we did."

There was another reason for doing so. In the early years, Forsythe did a lot of leasing and borrowed a lot of money to finance those leases.

"We talked to oodles of banks," he says. "And the banks, of course, wanted to know who the heck we were. So, we had to have audited financials, and we printed them up."

The annual report is audited by KPMG.

"Our salesmen use that as a sales tool," Forsythe says. "It started as a finance department typical report, fairly thin -- just the P&L, the balance sheet, footnotes, the auditor's opinion and maybe a president's letter. Now that we've grown in size, the marketing department gets involved; we put some customer testimonials in there."

The annual report also made sense when, in 1988, the company launched an employee stock ownership plan.

"We have a lot of entrepreneurial people who wanted to own a piece of the business," Forsythe says. "And I had all my eggs in this basket. When I started the business, I was broke, dead broke. Thank God my wife was an airline stewardess or we would have starved to death. I sold $2.5 million worth of stock to the employees. And that was in the 40 percent income tax days, and they paid $25 a share for it. We got a bank to finance it. Our last ESOP appraisal was as of Dec. 31. It was, I think, $320 a share. We've got a lot of millionaires in that initial bunch, and they give a damn about what we do with this company.

"When I make a mistake and blow some money, they look at me pretty funny. And when I do a good thing, they actually like me. Some of them are going to retire with $1 million, $2 million of company stock. And we buy that stock back when they quit or retire."

Sharing the wealth

Forsythe founded the company with Jim McArthur in 1971 with $100 and a serious amount of determination.

"When Jim and I started this business, we both had a lot in common," Forsythe says. "We were both broke and unemployed. That's a common bond. We put our lot together. I love Jimmy to death; he taught me a lot, and we worked our asses off from 1971 for about nine or 10 years. We went from not having a car to having to walk the letters two blocks to a typing service. We went from that environment to where we're starting to take a little dough out.

"And, after nine or 10 years, we'd made enough money where that was not the common bond anymore. Jim wanted to branch out into real estate and other kinds of things, and I was an old stick-in-the-mud going, 'Let's stick with what we got here.' So, our common interest started to deteriorate."

McArthur sold his interest in the company in 1980.

"He wanted to go back to California, so one day I said, 'Put a number on the table,' Forsythe says. "And he did. I said, 'I'll do it if you want, but I don't think you should.' He said, 'I'll take it.' So I went to the banks, and they said they would finance it. So we bought Jimmy out.

"He's still one of the best guys in this whole wide world, but I think he got burned out on the computer business."

The turtle is a fitting image for Forsythe -- he calls the companies that sought the fast buck "rabbits," and many of them are no longer in the race. Forsythe has maintained his focus for more than three decades.

He's more than content to let the rest of the world race past him because at the end of the race, his plodding pace will carry him through to first place.

HOW TO REACH: Forsythe Technology Inc., www.forsythe.com or (847) 213-7000