For Darryl Robinson, the darkest day at TriLogic Corp. was when the company went to federal bankruptcy court to file a petition for reorganization.
That was a real low point for me, Robinson, TriLogics vice president, who had been with the company only a short period at the time, describes the companys Chapter 11 filing in 1997. At that point, there was a realization that took place that we had a hell of a lot of work to do.
But for Eric Bruce, the companys president and founder, rock bottom came not at the point of Chapter 11 bankruptcy, but when a group of key employees jumped ship with one of Bruces former partners.
I value friendships, says Bruce, president and CEO of the now-reorganized and fast-growing TriLogic. A very large portion of the people who left here were real close friends of mine, and it was not the best of circumstances.
Bruce and Robinson see the events from different perspectives. For Robinson, a numbers man relatively new to the company, it is understandable why the bankruptcy would loom large in his memory. He came to TriLogic because he viewed it as an opportunity and a challenge. The fall into reorganization, though, meant long days making tough decisions and facing hard choices, not to mention the possibility that, despite his efforts, the company could fail.
For entrepreneurs like Bruce, however, business-building is a long process of forging relationships based on trust and respect, often resulting in connections that come to feel like, if not manifest themselves in, friendships. Its one thing when your business goes elsewhere. Its quite another when your friends and long-time employees do.
Ironically, while questions of loyalty brought the company to its proverbial knees, another kind of loyalty breathed new life into the once-dying company.
Thanks to a few loyal customers and some painful lessons learned on the way to a full turnaround, Bruce and Robinson have almost entirely recaptured their previous success and created a new company in the process. Heres how they did it.
The crashes of 95
All companies hit rough waters from time to time, but with good management and strong fundamentals, most ride out the storms. Any one of the maladies that struck TriLogic in 1995 could have been overcome, although not easily, but Bruce is convinced that none by itself would have destroyed the company he started in 1984. Combined, however, they threatened a knockout punch.
The difficulties began in early 1995 when one of Bruces partners left and took 17 employees with him. Its very, very difficult to replace that many people in a technology company, Bruce says.
Its clear that Bruce doesnt like to talk in any detail about the exodus of nearly half of his 35-employee work force, the first of a trio of blows that year which buffeted the company and eventually knocked it to the mat. Hes convincing when he says that he has a positive attitude and chooses not to dwell on the painful past or the hint of bitterness that might still be lodged deep in his heart. But there is little doubt that the experience hurt and struck as deeply as the loss of money or the failure of a business might have.
The split came at least in part because Bruce and his partner were at odds over how the business should move forward. His former partners solution, Bruce says, was to sell more hardware in an increasingly competitive market that was squeezing profit margins. Bruce saw the companys future in software and consulting, developing what he calls end-to-end solutions for customers, from cabling and software to training and consulting.
Adding to TriLogics woes later that year was a virtual halt in orders from the federal government one of the companys largest purchasers stemming from a delay in Congress in reaching a budget agreement.
A laming loyalty
In a cruel irony, Bruces loyalty to his hardware manufacturer had left TriLogic vulnerable as well.
I was a dyed-in-the-wool Digital guy, says Bruce, who had worked for computer giant Digital Equipment Corp. before launching TriLogic. His companys exclusive relationship with Digital worked well, and TriLogic still purchases from the company.
But Digital began to have its own problems in 1995. It reacted by pulling in its credit lines for customers who needed to finance the purchase of Digital computers a move that made it difficult for TriLogic to ship Digital products to its customers.
TriLogic grew at a strong clip during the 1980s, and by 1994 had hit the $24 million mark. But sales slipped to $20 million in 1995 and still further the next year. With its mounting problems, TriLogics customers, employees and bank began to lose confidence in the company, and sales continued to decline.
By early 1997, it was all too clear: TriLogic would have to reorganize or risk going under. So on Feb.7, the company filed a Chapter 11 petition in federal bankruptcy court in Pittsburgh. If losing his employees was the most painful installment for Bruce, the bankruptcy was the toughest.
It was probably the worst thing Ive had to go through, says Bruce.
With help from Cornerstone Capital Advisors, a downtown turnaround firm, a $900,000 loan from Keystone Minority Partners and a $2.3 million line of credit from PNC Bank Corp., TriLogic got back on its feet and rather quickly. By August, it had emerged from reorganization, revitalized and on its way back.
Bruce has come away from the fall and rise of TriLogic with some valuable, if hard-earned lessons, and all indications are that the company has been tempered by its battle with adversity. With new products, some lucrative agreements with private industry and government clients and a shift in focus, Bruce is confident that a return to the $24 million sales mark is on the horizon.
He is eager to put the bruises of the past behind him, but isnt likely to forget the lessons these lessons he learned during the past four years.
- Be willing to change directions. TriLogic was launched primarily as a hardware vendor, but as the market became more competitive in the late 1980s and a recession hit in the early 1990s, hardware providers scratched to capture market share and pricing grew cutthroat. Resellers like TriLogic got caught in the squeeze. Bruce says the faster TriLogic ran to keep up, the farther behind it found itself.
His vision, Bruce says, was to shift the companys emphasis to services like training, consulting and network design as its primary offerings. His former partner resisted, and that, says Bruce, was partly responsible for getting the company into trouble.
TriLogic now stress the applications and consulting side of the business. Hardware is still important, but now its a pull-through, says Bruce, who describes the concept as an additional revenue stream that is fed by the rest of the business.
- Get outside advisers. Bruce says the help of outside advisers was crucial in getting TriLogic back on its feet. Cornerstone Capital Partners, a Pittsburgh turnaround firm, was key, says Bruce.
Believe me, it really helps to have a fresh look, says Bruce.
Turnarounds amount to putting a company into intensive care and utilizing professionals in a variety of disciplines, from financial and accounting pros to human resources and marketing experts, to fix the problems.
The turnaround professional is going to be working the deal 20 hours a day, says Don Linzer, a shareholder with Schneider Downs & Co. who heads its mergers and acquisitions group.
Linzer says a turnaround team will come in and do a quick smell test to isolate problems, figure out whats goin g on and what needs to be fixed immediately.
- Dont rely too heavily on any one vendor or customer. Up until Digital had their problems, they would have done anything for us, says Bruce. But when Digital began to slip, TriLogic found that it was just another customer.
TriLogic had a comfortable but ultimately unhealthy dependence on Digital Equipment. When Digital saw the need to pull back, a relatively small company like TriLogic had little leverage against the ailing giant.
Dont put all of your eggs in one basket, advises Bruce. The company still buys from Digital, but to hedge its bets, has established relationships with a number of vendors, including IBM, Microsoft, Cisco Systems and Novell.
- Build alliances with strategic partners. You have to realize that the real way of getting things done in the global economy that were dealing with is to have partnerships, says Bruce.
TriLogic hasnt wasted any time in building those kinds of relationships. It has struck a relationship, for instance, with an Australian partner that offers a software product which allows the development of applications. The company also has struck a deal to act as a reseller for Filemark, a Natick, Mass., company that is a leader in information archival, retrieval and distribution solutions.
Last fall, the company landed a five-year contract with the General Services Administration to provide hardware, software, information technology and desktop and technical training to the federal government.
- Loyalty helps if you can deliver. Without strong relationships with a few key customers, TriLogic likely would be out of business today. While Bruces loyalty to Digital almost sank TriLogic, his companys performance for a few key customers proved invaluable in its resurgence.
The critical factor for us was we had a couple of customers who stuck by us, says Robinson. The City of Pittsburgh continued to purchase from the company, and both Robinson and Bruce have high praise for the University of Pittsburgh Medical Centers decision to continue to do business with TriLogic during its early troubles and through its bankruptcy.
Bill OConnor, UPMCs director of purchasing, says the companys candor played a role in his decision to continue to work with TriLogic.
They gave us fair warning and told us they were going to have problems, says OConnor.
But TriLogics honesty wasnt the only reason UPMC decided to hang in. Over a relatively short relationship to that point, TriLogic was able to demonstrate that it could deliver what UPMC needed.
We gave them some very difficult things to do early on, and they performed and acted with very high
integrity, says OConnor. Everything we asked them to do, they were able to do.
So OConnor went to bat for the ailing company, working directly with manufacturers to ease payment terms and letting them know that they werent going to get stuck if TriLogic flopped.
We assured the manufacturers that, as long as we got product, they were going to be paid, says OConnor.
The last ingredient
Bruce and Robinson are a lot more relaxed these days. Instead of a failed business behind them, they are looking forward to moving TriLogics headquarters to a new facility in prestigious SouthPointe, just across I-79 from its current Canonsburg location. Thats a far cry from the situation the company faced just two years ago.
Without the Chapter 11 process, Bruce contends, the company wouldnt have had a chance to survive. Beyond that, good relationships with customers, access to capital and a willingness to make a fundamental change in the way the company does business have been instrumental in the companys resurgence.
But there is one factor that may have been the critical one, the one without which the others likely would have gone fallow. Ultimately, says Bruce, survival depends simply on guts and determination. And those, he says, you have to provide that yourself.