|AN IMMIGRANT'S TALE
It's the kind of business nobody wants to run: selling PCs to price-conscious customers. But Edy Bedoya has spent a lifetime preparing for it.
By Samuel Fromartz
Eduardo "Edy" Bedoya leans back in his office chair, wraps a telephone headset around his head, and punches in the number of one of his computer-component suppliers. He has received a bill that doesn't match the purchase order he placed the day before, and he wants to iron out the discrepancy.
"So, my good friend, how can I take you to lunch when I come to L.A.?" he asks. "Buddy, I want to take you to lunch, but how can I when you make money off me like this?" He laughs and then pauses. "I know, you're just trying to get that Mercedes before me. But if you buy the Mercedes, how am I going to have the money to buy lunch?"
After a few jokes and a short discussion, the supplier agrees to lop a penny off the price of the 4,000 CD-ROMs in the order. Bedoya hangs up the phone and slips off his headset, satisfied.
It's a perplexing sight, watching the founder and owner of a $13-million business pick up the phone to save one penny per unit. After all, what's 40 bucks to a computer reseller that's been growing at 30% a year? But what matters to him more, Bedoya explains, is the principle. "I need to make sure that I can trust him," he says.
Such relentless pursuits save EBC Computers Inc. (#83) a few thousand dollars a month. And without such vigilance, frankly, the business might not be around, let alone ranked among the nation's fastest-growing private companies. Eighty percent of EBC's business consists of selling computer parts like monitors to companies and techies who build their own machines. Bedoya says prices for such gizmos fall rapidly, sometimes several times a week. Even a one-day delay in a truckload container bound for EBC's shipping dock costs him about $500 because of the falling value of the goods inside, he says.
Given the ultracompetitive nature of the industry--last year EBC eked out a net profit of 3%--Bedoya doesn't have the luxury of working a niche armed with a unique product. It helps that he has no illusions about the nature of what he's selling (a commodity) or the most effective strategy for selling lots of it (prices in the vicinity of rock bottom). Others might view EBC's positioning as more of a trap to be avoided than a strategy to be embraced. How low can EBC continue to go, after all, before Bedoya prices himself right out of existence? By balancing on such a thin bottom line, he risks taking a false step that could precipitate a serious tumble.
Bedoya knows all that. And he loves it. From the start Bedoya, who came to the United States from Peru in 1985 with just $100, built the business around his "core competency," though he would never call it that: living on the edge. "If he had stayed in Peru, he probably wouldn't be alive today," says his brother Mario, the older of two brothers who followed Bedoya to the United States.
Bedoya runs a lean-to-the-bone operation because, well, that's what he does naturally. Driving to work in Salt Lake City, he instinctively checks the price of gasoline at service stations. Later he goes to the trouble of exchanging a few sickly tropical fish at Wal-Mart to save the $2.98 that he shelled out for each one. Even his sparsely furnished retail space is located in an industrial district rather than a mall with a lot of foot traffic. And for the past two years he has paid himself just $60,000 a year.
During lunch in a Chinese restaurant (food's great and the prices...well, you can guess) the waiter notices the EBC logo on Bedoya's shirt. "Are you the guys that sell computers?" the waiter asks. "Yep," Bedoya replies. "One of my guys here is looking for a laptop," the waiter says. "I hear you have good prices." Bedoya smiles and hands him his card.
On it he doesn't use the title of CEO. He's the purchasing manager--which is clearly the 41-employee company's most critical position. "I make 5% the first week I stock a product, I break even the second week, and then I lose 5% the third week," says Bedoya. Adding value? That's for wimps. He's most comfortable in an unforgiving landscape. "It's what gets me up in the morning," Bedoya says.
To maximize profit, Bedoya keeps his inventories bare and moves high volume. Each day he monitors the number of computer chips (CPUs) and hard drives in stock. Each day he orders more, aiming to keep no more than a day and a half of CPUs and five to seven days' worth of hard drives on hand.
"You can't afford to wait too long," Bedoya says, "or the price will change." Pentium III 450 chips, for instance, sold wholesale for $510 each in February, $289 in May, $262 in June, and $225 in mid-July--a 56% drop over five months, he says. For EBC to make money on a part, the company has to sell it before the price takes its next tumble. "You can't get too greedy," says Bedoya.
Not that Bedoya has anything against personal wealth. He came to America, he says unabashedly, because he wanted "to be rich and famous." He soon realized, however, that "things are not that pretty in the United States when you don't have money."
His native country, still, was much tougher. When Bedoya left, Peru was battling the Shining Path guerrillas in a brutal conflict that ultimately killed more than 30,000 people. Bedoya, a cadet in the police academy, would have been destined to fight. So he left, first staying with a family friend in Miami and then moving out on his own.
Unlike many poor immigrants, Bedoya was brought up in the middle class. His father is a lawyer in Peru; his mother, a social worker. And he was educated back home. But his first job in his adoptive country was cleaning toilets in a Peruvian restaurant for $2 an hour. (Minimum wage was then $3.35.) "The restaurant owner offered me the job and said, 'Take it or leave it,'" Bedoya recalls. "What could I do?" He moved up to dishwasher, but his parents were worried. As his brother Mario puts it, "They thought it didn't make sense to go to a developed country and then work in a kitchen." But Bedoya worked 12 to 16 hours a day, seven days a week, for three years. "I knew he was going to go places," says Hector Almeyda, the family friend who first put him up in Miami. "He was very hardworking."
In his first restaurant job, his big break came from the Peruvian head chef, who was also a neighbor. "Pepito told me that before he moved on, he was going to teach me how to cook," Bedoya recalls. His first task: peeling 50-pound bags of onions. He cried so much that his tear ducts dried up.
After his mentor left, Bedoya rose to head chef. He then advanced from one restaurant to another--half a dozen in all--and with each move sought a slight raise. He also built up a collection of 30 or so credit cards. "I didn't use them. I just wanted to feel like I could buy things," he explains. When a restaurant he worked in closed down, a friend suggested he come pick oranges. He climbed ladders and picked fruit for three months in Jupiter, Fla., working 10 hours a day and sleeping on a dirt floor with a blanket.
It turned out to be a lucky career move. In 1986, President Reagan signed a law granting amnesty to illegal aliens who had resided in the United States as of January 1, 1982. At the last minute, Congress also slipped in a special amnesty for farm workers who didn't meet the residency requirement. That provision--and his three months in the fields--qualified Bedoya for the amnesty program. He received a U.S. employment-authorization card, which allowed him to work legally, and began the slow process of securing his green card, or permanent residency. Although he became a U.S. citizen in 1998, he still carries around the employment card.
Around the same time, Bedoya heard about a school in Florida where he could take a two-week jewelry-repair course. After he completed the program he divided his days between kitchens and jewelry stores. Besides doing repair work, he bought gold jewelry on the side, polished it up, and then sold it for twice what he had paid for it.
His life improved, but Bedoya still harbored dreams of becoming a lawyer like his father. Having joined the Mormon church, he was advised by a bishop to apply to Ricks College, a Mormon institution in Rexburg, Idaho. On New Year's Eve 1988, he drove from 90-degree Florida to Idaho, where it was so cold that his car didn't start again until April. Higher education was no more hospitable than the weather. "It would take me 30 minutes to read one page with a dictionary," he recalls. Fearing that he would never escape from remedial English, Bedoya abandoned any notion of becoming a lawyer.
That summer he returned to Miami to work, eventually saving about $5,000. He also amassed about $15,000 in jewelry, including heirlooms from his mother, who had sent them to him for safekeeping. When the summer ended, he stuffed his car with all he owned and set off for Idaho. On his way he stopped at a friend's house for a few minutes to say good-bye. When he emerged, his car--with all his cash, credit cards, and jewelry--had been stolen. He sat down on the curb and started sobbing. "All he had left was the clothes on his back," says his friend Marian Velenzuela, who shuffled him off to T.J. Maxx, the discount retailer. Others pitched in for a plane ticket.
"I was so embarrassed. I felt so weak, sad, and lonely," Bedoya recalls. "I took the airplane with those T.J. Maxx bags and came back to Idaho. They were all I had.
But had Bedoya not been penniless, had he not been ripped off or hit bottom, he might never have gotten into the computer business.
When he returned to college, the school made an exception to its 20-hour limit on work study so that Bedoya could work 40 hours a week and still attend classes. He scored a work-study job in the computer lab-- "though I didn't know anything about computers," he insists. There he befriended a couple of all-knowing techies. Within six months of his introduction to computers, he was building PCs in his dorm room and selling them to classmates. His girlfriend (now his wife), Colette, designed ads, which they plastered around campus.
Even after the couple graduated and moved to Salt Lake City, in 1991, Bedoya worked the early shift at a software company's help desk so that he could spend the afternoon nurturing his business. "He had his day job and then would open up for business at 3 p.m., running it out of his basement," recalls Tony Tran, president of Traditional Technology Group Inc. in Los Angeles, one of Bedoya's first suppliers. "I was curious about him because I never saw anyone do business like that."
Business? Colette preferred to think of it as a hobby. "He used to drive me crazy, sitting by the phone all weekend, waiting for customers to call," she says. "I didn't see the company's growing as much as it did."
As business picked up--through word of mouth and small classified ads--customers too grew impatient with the company's unusual hours. So in 1993, Colette left her job as a customer-service representative at software giant WordPerfect Corp. (Inc. 500, 19871990) to care for their newborn son and answer the phone. "Then it started to get really busy, and Colette sometimes didn't have time to eat," Bedoya says. So they hired a full-time baby-sitter and an employee. When Bedoya began thinking about leaving his job, Tran flew in from Los Angeles to calm his--and Colette's--nerves. "We were talking about it at 10 p.m. in his living room, and people would knock on the door looking for memory chips," Tran says. "I said, 'Edy, you can't live like this.' So the next day we started looking for a warehouse." In 1994 revenues reached about $575,000.
Tran also helped Bedoya work his way into a network of 50-odd suppliers, all of whom are Chinese Americans based in either Los Angeles or San Jose. The vendors buy directly from Taiwanese companies that make chips, laptops, monitors, and other PC parts and act as brokers when retailers want to clear out inventory. The players in the network are constantly phoning, faxing, and E-mailing one another to buy and sell goods and trade gossip. Through the network Bedoya gains access to intelligence and rumors, not only about prices but also about competitors who might be going under.
Tran and Bedoya work closely together, traveling to computer trade shows in Taiwan, where they meet manufacturers, check out new products, and gorge themselves at elaborate Chinese banquets. "Now Edy's like a Chinese vendor," Tran brags. "In fact, the other suppliers say he's too Chinese. He bargains too much. They tell me, 'Tony, you've been teaching Edy too much,'" Adds Bedoya, "They like me because they say I can play the game."
When asked what that means exactly, he dials a vendor for an accurate answer. "Are you very busy?" Bedoya asks. "Can I ask you one question? When you say I play the game, what do you mean?" Bedoya hits the button on the speakerphone. From it comes the supplier's reply: "What I'm saying is, most people like you because you know how to play with strategy. You come off like you're really naïve, but actually you're a monster. That's why people like you."
In the network what matters more than the everyday haggling is the trust that develops among the members. With lower-priced start-ups rushing in all the time and others going under just as fast, folks like Bedoya need every advantage they can scrounge up just to squeeze out their slim profit. That is especially true in the Internet age, when computer distributors are selling at cost or actually giving away PCs. When Bedoya sells a fully configured PC--such systems account for about 20% of EBC's business--he marks it up $60 over what he paid for the components. Everyone in the network operates under similar constraints. Getting a deal now and again might be important, but even more so is maintaining good relations so that you don't get cut off. "To survive, you can't jerk people around, because the competition is really bad," says Tran.
Beyond pricing, the suppliers have helped Bedoya finance EBC's growth without his taking on debt or soliciting investors. They grant him 30 days to pay for his order, instead of demanding cash on delivery. So Bedoya buys all he needs, sells the inventory within a week or two, and pays his bills on time. Assuming, of course, that his purchasing manager's instincts are on target.
Taking a break during a lengthy meeting, Bedoya pops on his telephone headset and rings up a supplier, a Chinese woman from whom he has bought computer chips for the past six years. It's late in the afternoon, and he hasn't had a chance to find out about the latest price action in CPUs.
"Ni hao ma?" Bedoya says, offering a Chinese greeting seasoned with a Spanish accent. "Darling, where've you been at? I've been calling you like crazy. Tell me, CPUs, up or down? Intel's going up? AMD down? How much down?" Pause. "Two dollars? What's the price on Pentium III 450s--$265? Really? Oh my gosh, you're killing me. I think I'm selling below cost." He checks his price chart and quickly realizes the Pentium III is one of the few exceptions to the downward price slide--prices are moving up. "I'm selling it for $261. No wonder it's moving."
He puts the supplier on hold and pages his manager, who rushes into Bedoya's office. "I want you to raise the price of Pentium IIIs to $275 immediately. Respect any orders placed, but for anyone else today the price is $275." Then he takes the supplier off hold and places an overnight order for computer chips.
But the cost of Pentium IIIs just rose by around $10, which means that the result of today's conversation will be a reduction in Bedoya's profit margin on the chips. Intel, he explains, has recently announced a price cut to take effect soon. Suppliers are wary of stocking up on chips, fearful they will get left holding the bag when the price falls. With Pentium III supplies short among distributors, prices are going up.
Sometimes Bedoya wins, sometimes he loses, but as long as he averages out with a slim profit, he's not complaining. While other entrepreneurs might shun such a business--and for understandable reasons--it suits Bedoya just fine. Long ago, he says, he learned he could survive and even prosper if he was tenacious enough, relentless enough.
In a cutthroat industry, those qualities have gotten him where he wanted to go. In life the results have been harder to digest. "I went back to Miami, to a restaurant where I had worked 10 years earlier, and the same guy that was washing dishes next to me was still there. It made me so sad I went outside and cried," he says.
He talks of other painful memories, such as returning to Peru for the first time in six years and seeing that his father was driving the same Fiat he had had when Bedoya was a teenager, and visiting his cousins, who are very poor. "Eduardo suffered the most in this country," says his brother. "When he came here, he didn't have anybody. He had the hardest time, but he also became the most successful."
Bedoya still works hard, pulling 50-hour-plus workweeks. He has considered selling a minority stake to Tran, who has expressed interest. It would cement their relationship, although Bedoya doesn't need the money in order to expand his business. And then there's the restaurant. Bedoya, who still loves to cook, thinks about opening a Peruvian joint with his old friend Pepito. "The only problem is that he cooks seafood and we're not by the sea," he acknowledges.
Soon he's back on the phone, cajoling another supplier in badly fractured Chinese. After he hangs up, he mentions that he plans to start taking Mandarin language lessons--again. He tried once before but gave up because he found it too hard. So why is he considering it yet again?
Before answering, he thinks for maybe a nanosecond. "So I can get even better prices," he says with a laugh, his eyes brightening at the very thought.