MPC looks to boost biz

At first glance, the July acquisition of MPC Computers, a $400 million-a-year PC maker, by the much smaller Hyper Space Communications is puzzling. But it could boost MPC's government business.

The acquisition gives the previously private MPC immediate access to public financial markets and the cash it needs to fund growth, said Adam Lerner, the company's executive vice president and general manager of sales and marketing. MPC is working to cement a reputation as a one-stop information technology specialist provider.

Earlier this month, MPC took another step toward completing that strategy by becoming a supplier of Sun Microsystems products to state and local governments under the Western States Contracting Alliance, a 12-year-old organization that provides 15 states with cooperative purchasing power of goods and services.

"We think it's a terrific growth market for MPC, compared to the potential of the commodity market," Lerner said. "It's a relatively small part of the overall IT market that's starting to pick up steam, and we think it provides us with a wide open space in which to grow."

MPC supplies some federal agencies. Its largest customers are the Department of Veterans Affairs, the Army and the Navy. Education at the state and local levels is another focus for the company, Lerner said.

The Sun deal is indicative of MPC's strategy for the future, he said.

In addition to manufacturing computer systems in Nampa, Idaho, MPC is looking to add low- and high-end products to become a one-stop IT store, Lerner said.

"Around one-third of our sales last year were in non-MPC products, including such things as printers and scanners," he said. "To that extent, we are more a company like CDW Corp. than a Dell. That side of our business has grown in excess of 20 percent a year over the past few years."

HyperSpace, a 4-year-old developer of application acceleration software, went public in October 2004 and immediately searched for acquisitions, said John Yeros, the company's chairman and founder.

Executives at Gorse Technology Group, MPC's owner, and HyperSpace first talked in February. HyperSpace was convinced that acquiring MPC could bring value to the shareholders of both companies if they correctly structured the deal, Yeros said.

"For MPC, it means going from ownership by Gorse, which just wanted to extract the maximum return for its investment but with no thought to long-term value and growth, to a strategic partnership with HyperSpace," he said. "For us to extract value from this deal, we need MPC to grow."

Hyperspace is essentially a holding company, and MPC is its only asset, Yeros said.

MPC's plan to focus on providing custom solutions is good, said Chris Campbell, senior analyst of federal markets at market research firm Input.

Science-based agencies such as NASA and intelligence agencies, are major buyers of custom solutions, he said. Consolidation at other agencies could increase the demand for customized systems.

HyperSpace officials also want to grow the company through mergers and acquisitions, Yeros said, and there's room in the new HyperSpace/MPC company for that to happen. The facility in Idaho is operating at only 20 percent of its capacity, he said.