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MAI Systems Corporation - Case Study Example

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Recently, Softbrands purchased the Company back in August 2006.
Since its inception in 1957, the Company has gone through significant changes. Being an opportunist and thanks to IBM and the Justice Department in 1956 when the entire computer industry was under the monopoly of IBM, Walter R. Oreamuno and his associate came up with an idea of re-purchasing the computer equipment from IBM customers and leasing it back to the customers at a lower rate than what was being offered by IBM. This idea was a great boast to the MAI's growth but did not last that long. During this time, the Company opted for an IPO with an
Not realizing IBM's strategy of depreciating its punch card equipment and the innovation of 360 third generation computer, MAI invested substantially in the older equipment that resulted in MAI's growth to stall. During 1967, a major setback on merger plans with Transamerica, Oreamuno stepped down as the CEO and was replaced by Luther Schwalm an ex-IBM veteran.
With a shift in strategy, the earlier investment in the older IBM equipment did not prove to be fertile, Schwalm decided to write-off the outdated older equipment. MAI's cash flow was impacted so substantially that its net worth in 1970 was negative $ 28 million. Oreamuno's decision proved out to be so wrong that even Schwalm was unable to bring the Company out of trouble. It was that when in 1971 MAI's CFO took over as the President. With a new strategy, Kurshan reorganized MAI into a holding company with various subsidiaries. Basic/Four and Sorbus subsidiaries of MAI did well in bringing MAI back to life. Sorbus took advantage of MAI's existing 1,200-person maintenance staff as its core, and expanding from there. Basic/Four was a major success instantaneously. In 1972, Basic/Four introduced the first multi-user transaction-processing mini-computer to use the Business Basic language. Basic/Four's revenue grew up to $43 million, and it was contributing around two-thirds of MAI's total earnings.

Focused on software products, MAI in 1977 took over acquired Word stream Corporation. This company was producing word processing systems and IBM-compatible CRT

terminals. MAI shipped its 10,000th computer system in the year 1980. The market for these computers began to shift drastically at this time, and small companies were turning to cheaper, newly available personal computers instead of the mini-computers that had been Basic/Four's forte. In 1983, the company introduced its MAI 8000, a super-minicomputer nearly as powerful as a mainframe computer, which was proficient enough of servicing up to 96 users at one time.

In 1984, a New York-based investor Asher Edelman purchased 12 percent of MAI's stock. Edelman by means of a proxy war for control of the company won four seats on MAI's ten-member board of directors. In the course of the proxy battle, Edelman received a settlement in the $1 million range following a libel suit filed against MAI concerning company advertisements. During April 1984, MAI International Corporation, the company's worldwide marketing arm, was folded into ...Show more


MAI Systems Corporation dba Hotel Information Systems is a provider of enterprise wide solutions including software solutions, mid-range, multi-user computer systems and their system software, other network products, and application software designed for several specific industries…
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MAI Systems Corporation
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