Goetzmann always looked for the next big deal

CNY Business Journal (1996+), Oct 20, 2006

* The man: Harry E. Goetzmann, Jr. was born June 10, 1937, in Buffalo. One of six children, he grew up with a strong work ethic. From the age of nine until he was 18, Goetzmann delivered the now-defunct Buffalo CourierExpress and was named outstanding newsboy in 1955. As a teenager, he developed a business building garages.

Goetzmann attended Syracuse University (SU) and worked his way through college washing dishes at a sorority house. He was also the house manager of his fraternity and an ROTC cadet. He found time to be an SU cheerleader and graduated in 1959 with a bachelor's degree in marketing.

An early illustration of Goetzmann's industriousness occurred during the Spring Weekend parade of his senior year. He helped his fraternity brothers build a float of a Mississippi River boat. After the parade, the participants left to recuperate, but Goetzmannn saw an opportunity to make money. Enlisting the services of some fraternity brothers, the group hauled away the debris from the parade and charged the participating fraternities and sororities a fee. While each worker earned $1.50 an hour, Goetzmann pocketed over a $100 in profit.

* The early years: From 1963 to 1967, Goetzmann worked as a salesman and then as a marketing manager for America's premier computer company - IBM. He followed that with a short stint at Datamedia Corp. as director of marketing, before launching his own computer-leasing business Continental Information Systems (CIS) - in June 1968. Headquarters occupied 24 square feet of his Marcellus home.

In its first fiscal year, CIS lost $32,897. The next year, the company posted a profit of $3,432. By 1972, profit jumped to $142,286 on revenue of $1.23 million. With a staff of 20, CIS then rented space in Midtown Plaza (originally the SmithCorona factory) for $800 per month. Goetzmann joined his staff in downtown Syracuse, refurbishing used computers, and while the paint was drying, he would peddle leases or sales of the equipment. That fall, CIS opened offices in Pittsburgh, Hartford, and McLean, Va. and issued its first public offering: 200,000 shares of stock at $6.50 each. The sale was oversubscribed.

Goetzmann next jumped into the international market by establishing an office in Belgium. He quickly discovered that Europeans were eager to acquire large IBM computers, but the manufacturer was unable to meet world demand, causing long delays in delivery. CIS then began buying used computers from the Japanese, who disdained buying used equipment, refurbishing them, and selling or leasing them to European businesses. In addition, CIS ordered new computers from IBM and sold their place in line for a $100,000 to $200,000 premium to those demanding fast delivery. In 1978, CIS moved into 8,000 square feet in MONY Plaza. In 1979, revenue from leasing generated $5.62 million, while computer sales topped $33 million. Revenue from all sources totaled $41.23 million.

* Rapid growth: The 1980s brought rapid growth to CIS. In 1982, IBM stopped renting computers on a shortterm basis and began pushing outright sales. For those companies which preferred leasing rather than buying, CIS was positioned to respond. The company had just raised $5.4 million in cash from a stock offering and had expanded its line of credit to $125 million. CIS also created investment funds made up of a portfolio of leased equipment. The portfolio was similar to a mutual fund, except that it was based on equipment, not stock. Investors received a percentage of the lease payments.

Revenue in 1982 totaled $64 million. By 1985, revenue jumped to $153 million. On Feb. 21, 1985, Goetzmann realized a childhood dream when the New York Stock Exchange listed his company. In fiscal-year 1987, CIS boasted revenue of $300 million, up 36 percent from the previous fiscal year. Net income was $13 million. Employment in 1982 crested 100 worldwide; by 1985, employment in Syracuse alone reached 140. CIS sought new headquarters in 1984 occupying 25,000 square feet on James Street.

In February 1987, Barron's wrote an article about CIS's "impressive growth path." In August, the company moved again, this time to 96,000 square feet in the former Carder Corp. headquarters.

* The Implosion: The year 1987 saw a flurry of acquisition activity. CIS bought Meszaros Associates, which operated under the name COM-PRO. The company had 200 employees scattered among five offices. Headquarters was located in Buffalo. COM-PRO offered program and systems analysis, in addition to long-range planning. Its customers typically housed large computer data-processing systems. CIS also bought Aviron Computer Technologies, a New Jersey company that reconditioned used computers. The third acquisition, which closed Aug. 21, was of a direct competitor CMI Holding Co. of Bloomfield Hills, Michigan. CIS paid $50 million in cash and assumed $55 million in debt to create the second-largest independent computer-leasing company in America with combined revenue of $650 million.

Two months later, the stock market collapsed, and with it CIS's plan to issue stock to pay for the CMI acquisition. In October 1988, CIS refinanced $110 million in short-term debt with Prudential Insurance Company of America. Prudential, which financed the CMI acquisition, issued $60 million in senior fixed-rate notes and another $50 million in subordinated fixed-rate notes. The term was 10 years with no principal payments due for five years. In January 1989, CIS missed an interest payment to Prudential of $3.8 million. That same month, CIS sought Chapter-11 bankruptcy protection. CIS posted fiscal-year 1989 losses (year-end Feb. 28) of $212.9 million, of which $197.3 million occurred in the fourth quarter. On Oct. 24, the bankruptcy-court judge, at the urging of the unsecured creditors, appointed James L. Hassett as trustee. Goetzmann resigned his office Nov. 9. The bankruptcy process lasted five years before a substantially slimmed-down company emerged. Creditors received some compensation; CIS stockholders received nothing.