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This Is Not His Father's Comdisco


People: Dynasties

This Is Not His Father's Comdisco

Second-generation CEO Nick Pontikes remakes the old-line computer company for the Internet Age

During a 1998 flight to Europe in Comdisco Inc.'s corporate jet, Nicholas K. Pontikes, then CEO-in-waiting, faced a grim decision: His father, Ken, who built Comdisco into a $2 billion computer-leasing powerhouse, had died four years earlier. Now Nick, as Comdisco chief operating officer, was facing deteriorating margins in the mainframe leasing unit, once the heart of his father's company. He swallowed his emotion and recommended that Comdisco pull the plug. It's a move that would likely have troubled his father. But, says Pontikes, "I can't do things based on what [my dad] would have liked me to do."

After eight months as CEO, Pontikes, 34, is speeding up his bid to transform his dad's old-line computer-leasing business into a cutting-edge services company that offers everything from high-speed Internet access to Y2K consulting. Last January, he announced the sale of his dad's mainframe division to IBM for $485 million. Then, in March, he bought Prism Communication Services, Inc., an Internet-access and telecom company geared toward business customers, for about $53 million; he is about to spend another $400 million to roll out the service in 33 U.S. markets. And he's hard at work polishing up Comdisco's humdrum equipment-financing image by readying a new logo and advertising campaign.FINDING FOCUS. Comdisco, based in Rosemont, Ill., will now be increasingly focused on such high-margin markets as providing software and desktop consulting, managing networks, and overseeing Web sites for big corporate clients such as Charles Schwab Corp. and Caterpillar Equipment Inc. Currently, services make up just 14% of revenues, with the rest coming from specialty computer leasing businesses that Pontikes retained, such as equipment for the healthcare and electronics industries. But he predicts services will grow to 50% of revenues by 2001. Wall Street is already banking on that. With earnings projected to rise 9%, to $164 million, for the fiscal year ending this month, on revenues of $3.5 billion, Comdisco shares have risen 57% over the past 12 months, mirroring the performance of Nasdaq.

Matching his father's business accomplishments, however, won't be easy. Pontikes has entered a hotly contested battlefield. Comdisco, which had been the No. 1 independent equipment-leasing player, now must contend with the likes of AT&T and PC giant Dell Computer Corp., both of which have spent years developing consulting services for corporate clients. "There's a lot of wood [to chop] between here and victory," says Thomas H. Patrick, a board member since the elder Pontikes founded the company 30 years ago.

For starters, Pontikes needs to show he can do more than just sign deals. Says James E. Schrager, University of Chicago professor of entrepreneurship who has followed Comdisco for 20 years: "When you see a CEO buying and selling, you have to ask if he's putting together a strategic group of companies or simply putting on the latest clothes that Wall Street says to wear."LOOMING LEGACY. Pontikes has no doubts that he is up to the challenge and says he often draws on his father's example. Certainly, his father's legacy still looms large. Kenneth N. Pontikes, whose portraits and bronze bust adorn Comdisco's headquarters, started the company in 1969 with a $5,000 loan, after he figured he could make money selling used computers. Over the years, he built it from a one-person shop on Chicago's South Side to a booming outfit with 2,000 employees.

It's hard to miss Ken's visage in young Nick's face. They share the same prominent nose, strong chin, and easy smile. Their gestures are similar, and like his father, Nick cares little about fashion. His usual work attire is a polo shirt and khakis. But one thing the father and son almost didn't share was working together at Comdisco. Leery of going to work for his dad, Nick decided early on to forge a career of his own, despite pressure to join the business. He landed an internship at junk-bond powerhouse Drexel Burnham Lambert in 1985 and dropped out of the University of Illinois after his junior year to work full-time on Wall Street.

Pontikes now says he has no regrets about leaving school and prides himself on the 20-hour workdays he routinely put in first at Drexel and then at Blackstone Group. "He had all the tools and was a young star," says former Drexel boss Dean C. Kehler.

A brief and troubled stint running his own small investment bank, though, made Pontikes think again about joining up with his dad. So in 1992, when Comdisco's No. 2 executive, "Uncle Jack" Slevin, cornered Nick at his sister's wedding, pressed a finger in his chest, and commanded: "Hey you, now's the time," Nick agreed.

His first job was shoring Up the company's floundering disaster-recovery division, which managed data networks that kept big banks' systems running in the event of a catastrophe. He let go of seven managersto streamline decision-making and rejiggered the company's commission structure to encourage sales staffers to sign up longer term contracts. The moves propelled the unprofitable business into the black. "The disaster-recovery turnaround was Nick's success," says Rick Kash, another veteran board member. "He created his own equity."

Today, Nick cherishes the experience, recalling how he was able to learn from his dad. The two would often kick around business ideas, Ken listening as much as advising his only son. "I'd have a bunch of ideas about how to fix the company in 20 seconds," Nick recalls. "He'd shoot holes in them." In retrospect, Nick admits his father almost always made the prudent call.

Pontikes, who votes most of the 26% stake in family-owned Comdisco shares, became a kind of CEO-in-waiting after his father died of colon cancer in June, 1994. While heading the disaster-recovery division, Nick was promoted to the president's executive team and groomed until he became chief operating officer in November, 1997. When Pontikes assumed the chief executive post little more than a year later, it wasn't hard for long-timers to accept the new boss. Nick had played in the hallways as a kid, and besides, the family had always controlled a major stake in the company. Today, Pontikes' sister runs human resources and his uncle is on the board.

Now, a big part of Nick's job is explaining to the older Comdisco board members, most of whom are over 50, the urgency of moving fast in the age of the Net. Take the Prism Communications deal. "It was complicated technology, and he expressed it [simply]," Kash recalls. "I thought: `He's got it."' Indeed, for Pontikes, like many others in his generation, technology is intuitive. He loves it, constantly playing with electronic gizmos to relieve tension or listening to Pearl Jam on the latest handheld digital music gadget. Toys such as little wind-up flying saucers and an oversize golf putter now litter the same 11th-floor office his father once occupied.GROWING UP. Still, Pontikes has miles to go before demonstrating he's a fully formed leader. For most of the past four years, Slevin has been nearby to monitor the younger Pontikes' every move. Patience and communication, moreover, are virtues he has yet to master. He forgets that colleagues look to him for guidance while he speeds through important presentations. "We often tell him to slow down," says board member Patrick. "It's a combination of youth and enthusiasm."

Pontikes isn't worried. Just as his father saw a great business opportunity in his day, Nick is convinced he and Comdisco will ride the Internet boom. The way he sees it, working in what he calls the "fuzzy glow" of his father's memory can only help guide the way.By Roger O. Crockett in ChicagoReturn to top


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