ComputerLand settles dispute with ex-franchise.

InfoSystems to use ComputerLand division as vendor

A computer war in L.A. County between industry giant ComputerLand Corp. and its breakaway franchise InfoSystems has been averted, said company officials.

ComputerLand, a Pleasanton, Calif.-based computer reseller, dominated the L.A. County market through its Torrance franchise InfoSystems ($117 million in 1992 revenues) until last June, when InfoSystems broke off to operate independently as InfoSystems Computer Centers Inc.

Resellers are retailers that sell products they don't manufacture. Typically, resellers buy their products from a distributor, then add software, service and training packages before the computer is resold to the end user.

Both ComputerLand and InfoSystems accused each other of unfair competition and violating franchise agreements and filed lawsuits with the U.S. District Court. In late February, however, both sides reached an "agreement in principle to settle the case," said Martin Wolf, president of franchise and distribution for ComputerLand.

As confirmed by both Wolf and Zeb Bhatti, chief executive officer of InfoSystems, Infosystems has agreed to use ComputerLand's Datago division as its primary vendor. Datago provides computer products to dealers, such as InfoSystems, with a markup, but offers dealers no services or other options. Dealers supplied by Datago also aren't entitled to use the ComputerLand name.

The agreement is good news to InfoSystems, Bhatti said, because InfoSystems was tired of paying royalties to ComputerLand that amounted to anywhere between 2.5 and 6 percent of its gross sales. Now InfoSystems will merely pay Datago for product, with no royalties or fees attached.

InfoSystems had been a ComputerLand franchise since 1985, Bhatti said, when it was only a few million dollars in annual sales. But as InfoSystems grew and developed its own software systems, Bhatti said, the company "couldn't justify paying royalties for just buying product."

After InfoSystems broke off with ComputerLand last year, it began receiving its hardware through one of ComputerLand's chief rivals, Intelligent Electronics, based in Englewood, Colo.

Bhatti said InfoSystems came back to ComputerLand because it offered a "little better incentive" than Intelligent Electronics.

The agreement also averted an all-out war between ComputerLand and InfoSystems for the L.A. market.

Not only was InfoSystems the largest of ComputerLand's franchises, but it was the only one to terminate its relationship with ComputerLand since that private company was founded in 1976, said Ellis Posner, ComputerLand's area director for California and the Northwest.

For the fiscal year ended Sept. 30, 1992, ComputerLand posted $2.04 billion in "consolidated revenues," meaning all revenues minus franchisee profits, said Kit Robinson, a spokesman for the company.

ComputerLand didn't take to losing InfoSystems lightly.

Posner -- ComputerLand's turnaround and startup expert -- was sent to L.A. to grow the company's business again.

Posner set up shop in Santa Fe Springs and started hiring sales people away from other resellers.

Bhatti said he was concerned that, if an agreement had not been reached, ComputerLand would start selling its products at below cost and take business away from InfoSystems.

Now the two companies still operate as competitors, but the competition has been somewhat tempered because both are part of the same company, said Bhatti and Posner.

ComputerLand operates company-owned branches in 70 markets, said Posner. The computer giant also has 300 franchises and provides product to 500 Datago outfits, said ComputerLand's Wolf.

Posner said ComputerLand will still be competing against InfoSystems. But he also noted that "the more successful Datago is, the more money we have coming into corporate."

Posner said the ComputerLand business in L.A. County, which is currently generating about $45 million in annual revenues, is targeted to grow at 20 to 30 percent per quarter.

He said ComputerLand in L.A. County is still striving to reach $200 million in annual revenue in two to three years.

He said ComputerLand now has a staff of 60 in L.A. That includes 12 to 15 sales people, 30 technicians, eight systems engineers and 18 administrative employees.

Bhatti said InfoSystems has developed a number of its own systems and is specializing in three areas in particular: multimedia applications, which involve interactive technology blending sound and image; local area networks, which involve connecting several computers together; and wide-area networks, which involve connecting computers from different offices together.