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1984, Herold became the sole shareholder, and he changed the
company's name to Herold Marketing Associates.
Petitioner was very successful in its early years. Herold
recognized as early as the mid-1970's that personal computers
would become an extremely successful technology. Later, he
identified Apple Computer (Apple) as a company that was destined
for success in this fledgling industry. By cultivating
relationships with key personnel at Apple, Herold overcame that
company's initial resistance to marketing through sales
representatives. In 1980, its first year of business, petitioner
became Apple's first sales representative with a territory that
covered the Dakotas, Minnesota, and western Wisconsin.
Petitioner developed its territory for Apple from annual
sales of $1 million in 1980 to $70 million in 1984. In 1984,
Apple stopped using sales representatives and terminated its
relationship with petitioner. Just before the relationship
ended, Apple accounted for 80 percent of petitioner's sales
volume.
Herold changed the focus of the company by identifying three
of Apple's four largest accounts and concentrating on selling
them other electronics products. Petitioner ran into
difficulties in 1986, when all three of these key accounts became
insolvent. Herold then developed a three-pronged strategy
focusing on one major product line in each of three categories:
(1) Products that were currently well recognized and in demand,
(2) products that were just beginning to become available and for
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