In the best tradition of high-tech folklore, entrepreneur Bill Hayden launched CompuAdd Computer a decade ago with a $15 ad in a trade magazine and $100,000 earned selling real estate on weekends. That seed capital has paid big dividends for the Austin, TX-based maker and seller of computer clones. Last year, the company racked up $514 million in sales, not counting revenues from its mail-order spin-off, CompuAdd Express.

The first 10 years were a breeze compared with the difficulties Hayden faces today. In the direct sales market, CompuAdd is pitted against competitors ranging from mail-order upstarts such as Gateway 2000 to giant IBM. And computer “superstores”-volume discounters with rock-bottom prices-threaten CompuAdd’s 125 retail stores. These outlets account for half the company’s sales.

Hayden’s strategy for beating the competition in this radically changed marketplace is to return his company, now 1,500 employees strong, to its entrepreneurial roots. “We’re going to be small, nimble and focused,” says Hayden, sole owner and CEO of CompuAdd. Toward that end, he’s splitting CompuAdd into separate companies, each specializing in a single market such as mail order, software, retail, government, or international. He says he will probably take one of these new spin-offs public.

“I want to keep multiple channels open. You never know which one will hit,” Hayden says.

Despite the cutthroat climate, Hayden had planned to open another 75 retail stores this year, but now he says CompuAdd’s overseas efforts could use more attention instead. The company stumbled in its first European foray when customers equated its bargain-basement prices with poor quality. “We actually sold more when we raised prices,” says Hayden, somewhat chagrined.

Hoping to grab bigger profits in global markets, he adds, “We’re going to slack off on retail to focus more on international. We see it as our biggest opportunity.”