STARTING OVER Hayes, worn by downfall, trying to re-energize Microcomputer

Dennis Hayes's prematurely gray hair is proof of his monumental job as president of Atlanta-based Hayes Microcomputer Products Inc., a high-tech firm that makes computer modems and has set the industry standard for years. People who would have jumped to be in Hayes's shoes a few years ago would not pay to be in his place now. Hayes, 40, is trying to restructure his company as he rebuilds his life after a widely-publicized and devastating divorce. Industry analysts say Hayes, who built his company from scratch, is taking it back to the drawing board. Hayes would not consent to an interview for this article. While this Spartanburg native didn't invent the modem, he simplified it and made "smartmodem" a household word - at least to computer users. A modem lets one computer talk or transmit information to another computer via telephone lines. An industry leader, Hayes Microcomputer grabbed about 30 percent of the $1 billion dial-up modem market in 1989. But analysts say its market share is dropping. Although the company pulled in $120 million in sales in 1989, it hit peak earnings in 1984. Hayes started the company by assembling modems by hand on a borrowed kitchen table in 1977. He peddled the modems out of his car to small hobby computer dealers while lining up contract work on the side to support the fledgling company. Hayes was always fascinated with how things worked. "Yeah, that's Dennis," said Hayes's high school classmate Tom Mancke after reading an article about Hayes and his company a few years ago. For a Spartanburg High School science fair, Hayes built a simple laser at a time when lasers were new, said his physics teacher Major C. Rhodes. He also experimented with making 3-D images with lasers in the high school's Summer Science program, Rhodes said. Appropriately, Hayes's 1968 yearbook states that his nicknames were "laser" and "high voltage." Both of his parents - who still live in Spartanburg - have technical backgrounds. They worked for the telephone company. His mother as an operator and his father as a cable splicer. Although a few of his high school teachers said Hayes was "quiet," he was very active in high school. He belonged to the Delta Pi Science Club, Summer Science Research, Astronomy Club, German Club, Future Teachers Club, Art Club and the swim team. His science teachers said Hayes was an A-plus student. He spent most of his free time in the science department and even stayed after school to work on lab projects, said Donald Stroud, his high school physics teacher. Hayes was a quiet person who stood in the background, teachers and classmates said. "His mind was always working," said Doug Pridgeon, a Spartanburg investment broker who took some science classes with Hayes. "You could tell something was going on in his head. Little did we know what it was." Although Spartanburg High School didn't have computers then, Hayes took advantage of all the other scientific equipment there, Stroud said. Hayes got his first look at a computer when he entered the Georgia Institute of Technology in 1968. And he is still fascinated with them. Although Hayes never graduated from college, according to the college records office, he founded the leading dial-up modem company in the nation. The company's strong points are technology and service. But Hayes and his management team did not foresee the change in the modem market to low-end products. When the company started losing market share to clone companies with lower-priced modems, Hayes decided to develop new technology, diversify and refocus its product line. It cut prices on some modem lines as much as 30 percent over the last year. It also bought other related-products companies to diversify and support its research efforts. To keep up with technology, Hayes introduced a new high-speed, low-error modem called the Smartmodem 9600 V32 modem in June. It will help Hayes retrieve some of the market share it lost and help it be more competitive, said Greg Szumowski, data communications analyst for International Data in Framingham, Mass. Hayes also is working closely with AT&T to develop ISDN - integrated services digital networks - as a fully digital telephone system. Some diversification efforts, however, have not panned out. An expensive, five-year plan to market modems overseas has barely generated profits. And Hayes's reorganization plans to make his company more competitive and more profitable took a beating from his divorce settlement in 1988. Hayes married Melita Easters in 1982. During their messy and widely publicized divorce, his mind was not focused on the company, an industry analyst said. he married in 1982, an industry analyst said. Easters later worked for Hayes Microcomputer Products on company community relations and special events. She eventually was fired. "When I met (Dennis Hayes) he was borrowing money off of my friend to buy gas with" around 1987, said Judy Bynam of Spartanburg. She has been friends with Easters for 17 years. "They were both on real shoestring budgets and were helping each other out." Their humble beginnings ended differently. Georgia Trend magazine estimated his divorce settlement at $40 million, one of the largest ever in Georgia. Easters received an undisclosed cash sum, the mansion in Buckhead, custody of their two children and more. The same year of the divorce, Dennis Hayes married Mina Wong, whom he had an affair with in 1986 while still married to Easters, Georgia Trend magazine said. Wong was a director of Hayes's company but was dropped from the payroll in 1987 when Hayes filed for divorce from his first wife, the magazine reported. The divorce drained Hayes and his company. And the company's efforts to diversify also have been expensive as the modem market has shrunk and competitors are at its heels. The dial-up modem market has steadily declined from a high of $1.4 billion in 1984 to $1 billion last year, said Larry Cynar, an industry analyst for Dataquest in San Jose, Calif. As the market continues to decline, Hayes will suffer, he said. "They want to stay in the modem business until it plays itself out," Cynar said. "But they can't follow a declining market and expect a company to grow." With his shirt at stake - Hayes owns 92 percent of the company's stock - he is scaling back operations and taking the company back to its roots. "A lot of empire building was going on at Hayes," Cynar said. Over the past four years, Hayes closed regional offices and cut its staff by as much as 50 percent, Cynar estimated. By getting rid of many top management people, Hayes is trying to "flatten out the company, get closer to the trade and get more control," Cynar said. Although he said Hayes didn't lose control, "he relied very heavily on senior people underneath him that were probably carrying a message that things were good when things were starting to be not so good." But Dennis Hayes's personal and professional reputation don't seem to be tarnished by the events of the last few years. In fact, analysts are looking to Hayes to revive the company and provide it with the direction to remain competitive in a changing market. If anyone can do it, he can. Original Atex file name: HAYNOT.E