American Power Conversion Corporation Business Information, Profile, and History

Company Perspectives:

APC's mission: To create delighted customers by improving the manageability, availability and performance of information and communication systems through the rapid delivery of innovative solutions to real customer problems.

History of American Power Conversion Corporation

American Power Conversion Corporation (APC) designs and manufactures power protection and management solutions for computer, communications, and electronic applications. APC helps customers overcome problems with erratic electricity, making a wide range of products that serve as backup power supplies and analyze energy consumption and quality. The company's core product is an uninterruptible power supply device that regulates the flow of utility power. APC's uninterruptible power supply products range in price from $29.99 to $210,000. The company manufactures its products in the United States, Brazil, China, India, Ireland, the Philippines, and Switzerland.

Origins

APC began as a failure. The company was founded by three electronic power engineers from the Massachusetts Institute of Technology (MIT), two of whom--Neil E. Rasmussen and Emanuel E. Landsman--remained with the company during its formative decades. Landsman spent 15 years at MIT's Lincoln Library before cofounding APC, working in the Space Communications Group from 1966 to 1977 before joining the Energy Systems Engineering Group. Rasmussen joined Landsman at the Energy Systems Engineering Group in 1979, spending two years there before starting APC. APC was founded to make solar power products, but the business idea began to show its fallibility not long after APC was incorporated in March 1981.

The company floundered during its first months of existence, unable to find a product to sustain its operation and precariously reliant on government funding. In 1982, APC, in a desperate attempt to stay alive, began making lead batteries, designing its batteries to serve as backup power supplies to personal computers. The batteries were designed to provide temporary power in the event of a momentary power blackout or surge, thereby giving the computer user time to save data before it was otherwise lost. The foray into lead battery manufacture was a sideline venture, but soon making backup power supplies became the central focus of the company. In 1984, government funding and incentive programs for solar research began to disappear, portending the worst for APC. The company's management responded by introducing its first uninterruptible power supply (UPS) product the same year. The 750, using a lead-acid battery, provided power surge protection and backup power for personal computers, local area networks (LANs), and engineering workstations. The decision to shelve its solar power business and enter the power protection business not only saved the company from bankruptcy but also moved it into a market capable of creating a billion-in-sales company. APC became that company, the first company to generate $1 billion in revenue by manufacturing and marketing UPS products.

When APC entered the UPS market, no one either outside or inside the company had any idea how large the market for UPS products would become. The decision to enter the field was a decision to be relished in hindsight. Personal computer usage was in its infancy at the time of the 750's introduction. Computer networking, the Internet, and other factors that fueled the growth of the UPS market trailed considerably further behind the maturation of the personal computer market. The nascence of the markets that would come to depend on UPS technology helped APC considerably during its early years, allowing the company to secure a foothold without fear of competition from large computer companies. Further, the technology inside the 750 and its successors discouraged competition from another direction. The power supply of a UPS consisted of a lead-acid battery, circuitry designed to even out surges and lulls in the power, and a switch to detect a lapse in incoming power and automatically turn to the battery for backup. The electronic circuitry in the power supply discouraged conventional battery makers from entering the business. APC was shielded from larger, more established competition by the nature of its business, allowed to operate freely in a market perceived to be too small to entice computer companies and too sophisticated to seduce battery manufacturers into entering the fray.

Dowdell's Arrival in 1985

APC's advantageous position perhaps would have been worth nothing were it not for Rodger Dowdell, Jr. Though not a founder of the company, Dowdell was a particularly important figure in APC's history. Dowdell joined APC as its president in August 1985, beginning an enduring length of service that would see him preside over the company for more than two decades. For nine months before his appointment as president, Dowdell worked as a consultant for APC, developing a marketing and production strategy for UPS products. Before that, he served a six-year term as president of Independent Energy, Inc., a maker of electronic temperature controls.

Dowdell's strength was in manufacturing. He knew how to achieve optimal efficiency in manufacturing a product, a skill that would serve APC well as it established itself in its fledgling market and later as it contended with the pressures of a burgeoning market. Within months of becoming president, Dowdell directed the company's manufacturing operations to be moved from alongside Massachusetts Route 128 to Peacedale, Rhode Island. By moving to Rhode Island, Dowdell gave the young APC several advantages. Tax incentives were part of the benefits of a Rhode Island manufacturing base, where real estate was inexpensive and skilled labor was available. Dowdell was an executive, not an engineer, and his emphasis on reducing operating costs to increase profit margins helped APC gain its footing in a soon-to-be lucrative market. The company also was aided by a quality product. In 1986, the year APC relocated to Rhode Island, the 750 was awarded the "Editor's Choice" award by the influential trade publication PC Magazine. APC ended its fifth year of business with its product on the map and its manufacturing facility situated in an ideal geographic location.

During the latter half of the 1980s, the use of personal computers in corporate settings and the networking of personal computers proliferated. Data was flying from desktop to desktop in increasing volume, its vulnerability to erratic electricity threatening a major crisis to any business reliant on computers. Power protection was a necessity, and APC began to reap the rewards of its leading position in a once miniscule market. To keep pace with the growth of its market and to exploit it to its fullest potential, APC needed capital. Dowdell, realizing the need for an infusion of cash, decided to take APC public in 1988. In July, he completed the company's initial public offering, when the company's stock debuted on the NASDAQ for $7.50 per share.

The energetic growth of the markets APC served ignited APC's own growth. The company's sales increased impressively during the latter half of the decade, rising from $400,000 in 1984 to more than $35 million in 1989. Industry observers took notice of APC's advances and gave new merit to the market for power protection. In 1989, Business Week ranked APC number four on its list of the 100 "hottest" companies in the country, the same year Fortune listed the company as one of the ten "stock superstars of the 1990s" and Inc. ranked the company as number 40 on its list of the 100 fastest-growing public companies in the country. APC had arrived, holding sway with a 30 percent share of the backup power-supply market. Its products, ranging from a $2,000 power supply for minicomputers to a $169 backup for desktops, were respected and coveted, putting the company in an ideal position to grab the lion's share of the power protection business in the 1990s, a decade that would bring phenomenal growth to personal computers and related markets.

Becoming a Giant in the 1990s

The 1990s began with another move of the company's headquarters and an award to APC's influential leader. In 1990, Inc. recognized Dowdell as the magazine's New England "Entrepreneur of the Year," the same year the company moved its headquarters to West Kingston, Rhode Island. A look inside the company's new offices reflected Dowdell's focus on the manufacturing side of APC's operations. The offices, with papers stacked on the floor and only the bare minimum of furniture, belied the success the company was enjoying. All the trappings of a company fast on the rise were found in its production plant, a facility outfitted with an automated assembly line that placed and soldered components onto circuit boards. APC's strength was in its products, and as the 1990s began it possessed the products that would capture the bulk of the decade's business. The company introduced its Smart-UPS brand in 1990, a line of products that grew to become the industry's leading network power protection solution.

APC grew with ferocity during the 1990s, expanding its presence across the globe as sales skyrocketed. The company entered the surge protection market in 1991 and the UPS market for mainframe computers the following year. In 1994, APC made its first move overseas, where most of the company's products would be produced in the future. The first plant was established in Galway, Ireland, and was followed by a plant in the Philippines in 1996. At the end of 1996, Dowdell announced he was planning to build seven new plants in 1997 at a cost of between $10 million and $15 million each. His ambition was justifiable. The $35 million company that exited the 1980s generated $515 million in sales in 1995. A giant in the making, APC was seizing the opportunities produced by the terrific growth of the computer industry.

Exponential growth prompted Dowdell to push forward and expand APC's business scope. As the company built new manu- facturing plants in Brazil, China, India, and elsewhere, its long-term leader sized up other avenues of growth for the company. In 1998, APC spent nearly $70 million for Silicon A/S, a Denmark-based company that ranked as the third largest supplier of UPS products in Europe. The acquisition gave the company products designed for systems that used large amounts of electricity, such as those found at large data-storage centers and mainframe computer facilities. In 2000, Dowdell acquired EnergyOn.com, an Internet company that allowed customers in deregulated energy markets to shop for the most inexpensive electricity and natural gas prices. The acquisition pointed APC in two new directions, toward e-commerce and toward the energy marketing business. In the years to come, the company was expected to continue to diversify its interests.

As APC made its way in the early years of the 21st century, it exuded enormous strength. The pace of sales growth recorded during the first half of the 1990s continued during the late 1990s. In 1998, APC became the first company focused on UPS products to generate $1 billion in sales, posting $1.1 billion in revenue for the year. The company ended the decade with $1.3 billion in sales and began to demonstrate less vigorous growth at the dawn of the 21st century, as recessive economic conditions and a downturn in the technology sector delivered stinging blows. Despite the absence of frenetic sales growth--difficult to achieve for a company of APC's size--the company stood strong in the early years of the century's first decade, fueling optimism for a successful future.

As APC neared its 25th anniversary, the company stood atop its industry. Revenues reached nearly $1.5 billion in 2003, a year that offered evidence of the company's prowess. In a survey conducted by Computer Reseller News, solution providers selected APC as the winner in the UPS category. The company trounced its competition, emerging the favorite in 10 out of 11 criteria used to judge performance and customer satisfaction. The company's dominance must have provided satisfaction to Dowdell, whose tenure at APC had seen the march of UPS products from the periphery of the computer industry to its center. On the company's web site in 2004, Dowdell reflected on the growth of the UPS market and APC's fortune to have abandoned designing solar power products. "In 1984, when we built our first UPS," Dowdell wrote, "I don't think anyone at APC could have imagined a better scenario for the company than what we are seeing today. Data has become money, and it is flying around the globe, without bounds, at an incredible rate of speed. As a company we could not have hoped for a better business opportunity than one in which network downtime correlates to a loss of revenue."

Principal Subsidiaries: APC America, Inc.; APC Sales & Service Corporation; Systems Enhancement Corporation; APC DC Network Solutions Inc.: American Power Conversion Europe S.A.R.L. (France); American Power Conversion Corporation (A.P.C.) B.V.; APC Distribution Limited (Ireland); APC Deutschland GmbH (Germany); American Power Conversion UK Ltd.; American Power Conversion Sweden AB; APC Australia Pty. Limited; American Power Conversion Portugal, Ltda.; American Power Conversion Spain S.L.; American Power Conversion Italia S.R.L. (Italy); APC Korea Corporation; American Power Conversion Hong Kong Limited; American Power Conversion (Phils.) Inc. (Philippines); APC Japan, Inc.; American Power Conversion Brasil Ltda. (Brazil).

Principal Competitors: Liebert Corporation; Powerware Corporation; MGE UPS Systems; Trippe Manufacturing Company; Phoenixtee Power Company Ltd.; Belkin Components; Chloride Power.

Chronology

• Key Dates:
• 1981: APC is founded by three engineers from the Massachusetts Institute of Technology.
• 1982: To stay afloat, APC begins manufacturing lead batteries.
• 1984: APC abandons the solar power business and introduces its first uninterruptible power supply product, the 750.
• 1988: APC completes its initial public offering of stock.
• 1994: APC establishes its first overseas facility in Galway, Ireland.
• 1998: APC acquires Silicon A/S; sales eclipse $1 billion.
• 2003: Sales approach $1.5 billion.