Mail-order hardware retailer APS Technologies filed for Chapter 11 bankruptcy protection on 23 January, citing the death of the Apple clone market, and massive expenses fulfilling warranty obligations following the bankruptcy of Micropolis, which supplied it with high-end disk drives. APS now has 120 days to submit a plan to the US government for how it will meet current debt obligations.
"We'll probably take every day of that, and might extend beyond," says Paul McGraw, a vice president of APS, adding: "We have every expectation of recovering."
Though the company claimed a profit during the fourth quarter of 1994 - a period of severely competitive pricing for memory storage devices - APS faced some turbulent times when one of its primary suppliers, Micropolis, unexpectedly filed for Chapter 7 bankruptcy and liquidation in November 1997. APS bought drives from companies like Micropolis and Seagate, put them in plastic boxes with the APS name on it, and added customer support.
"The day they went out," McGraw laments, "anything they owed us was lost. Once you take a lot of cash out of a company, particularly a small company, it becomes very hard to move forward." As Micropolis' largest unsecured creditor, APS currently has a US$6.7 million suit pending against Micropolis' parent company, Singapore Technologies of Singapore.
"If anybody should take heat for this," says McGraw, "it's Singapore Technologies."
With over a million drives spinning in desktop computers and a reputation for high-quality customer service, Kansas City, Missouri-based APS had often been touted as a small business success story. But its money woes really began when Apple took its slice out of the clone business last September, leaving APS unable to recover the money it spent marketing its M-Power line of Apple clones, and holding millions of dollars of parts and clone licenses it bought from Motorola.
"Our investment basically became worthless when Steve [Jobs, of Apple] decided he did not want to play this game," McGraw says, recalling Apple�s decision to essentially discontinue its cloning policy. "If we had known this ahead of time, a lot of people who went into the clone business wouldn't have gone." APS continues to sell a line of IBM desktop and notebook computers.
Despite the Chapter 11 filing, McGraw says not much will change at APS. The company hasn't laid off any of its 200 employees, and none of its leadership has resigned. "It changes the way our accountants have to do their job, because we have to get approval from the court for each expenditure; but in terms of orders, repairs, tech support, it's basically standard operating procedure."
