PC companies' fates uncertain as complaints mount

Customers of Quantex Microsystems and CyberMax Computer are wondering what happened to the PC companies since a closely related company filed for bankruptcy protection.

4 min read
Customers of Quantex Microsystems and CyberMax Computer have been wondering what happened to the PC companies since a closely related company--possibly the parent of both computer brands--filed for bankruptcy protection this month.

In recent weeks, CyberMax and Quantex customers have faced delays in receiving products, had voice mails go unreturned, and spent hours on hold waiting to speak to someone at the company.

Both brands are linked to Fountain Technologies, a Somerset, N.J.-based company that filed for Chapter 11 bankruptcy protection Aug. 10, although the relationship among the privately held companies is not entirely clear.

Attempts by CNET News.com to reach a representative of Quantex or CyberMax have been unsuccessful. A lawyer for Fountain did not return phone calls seeking comment.

Tom Richardson, a CyberMax customer in Illinois, said he ordered two computers in June, and the first one didn't arrive until six weeks later. Richardson said the company initially told him that both computers would arrive within two weeks.

"The second one never showed up," said Richardson, who said he left repeated messages for various people at the company but rarely got his phone calls returned.

International Data Corp. analyst Roger Kay, who wrote a report on Fountain in 1998, said this week it is his understanding that the company is the parent of Somerset, N.J.-based Quantex and Allentown, Pa.-based CyberMax, as well as of the more business-oriented brand Pionex and possibly others. Kay said the combined brands amounted to a top 20 PC maker.

"They had basically different 800 numbers and the same operators would answer," Kay said. Each company targeted a slightly different customer base and offered a separate product line, Kay added.

"They had a pretty good strategy for a while," Kay said.

If Quantex and CyberMax have run into financial difficulty, they would be the latest victims of a rapidly consolidating computer industry. Major PC makers, such as Dell Computer and Hewlett-Packard, have been able to expand their share of the market in recent years, largely at the expense of the second-tier names like Fountain that helped drive down PC prices.

A former marketing employee who worked at both Quantex and Fountain declined to discuss the relationship between Fountain and the PC brands but said a cash crunch at Fountain has affected operations at CyberMax and Quantex in recent months.

"The cash problems starting back a couple of months have had an effect," the former employee said this week. "What you have been seeing on the outside is pretty reflective of what is going on on the inside."

The ex-employee would not say how many people are still working at any of the companies but said the difficulties encountered by customers reflect the turmoil inside the companies.

In its bankruptcy filing in New York, Fountain lists Intel as its largest creditor and states that it owes the chip giant $13.21 million. Microsoft is listed as being owed $3.97 million. AMD is owed $3.68 million. Federal Express, hard drive maker Maxtor and graphics chipmaker Nvidia are listed as having claims of more than $2 million each.

Min-Tsong Chang is listed as the company's largest equity holder, with a 45.5 percent stake in Fountain. Four other partners each own 13.6 percent of Fountain, according to court documents.

Fountain's brands served as a launch pad for companies trying to break into new markets. Advanced Micro Devices, for example, has cited Pionex as an early commercial customer for its Athlon chip.

Although Fountain tried to serve several niches, Kay said it had the size and problems of a second-tier PC maker and was forced to compete against larger companies with more resources, as well as more nimble, smaller competitors.

Fountain is not alone in its problems, Kay said, noting that gains in market share by the biggest PC makers have hurt many companies, such as AST. The five largest computer makers accounted for two-thirds of all computer sales last year, Kay said, up from about half of the market in 1994.

Kay said the companies that have been able to make it in a world dominated by the likes of Dell and HP have been the very specialized ones with a couple million dollars in revenue and a tight focus on one industry or location. By contrast, Fountain's brands were nationally distributed, and the combined entities probably did several hundred million dollars a year in sales.

"It's the second tier that gets squeezed because they can't fight on many fronts," Kay said. "They also can't hunker down like a real niche player."