Brooktrout, Inc. (BRKT)
Interview 2003 with:
Eric R. Giler, President
Business News, Financial News, Stocks, Money & Investment Ideas, CEO Interview
and Information on their
products and services that allow voice, fax and data to be distributed over the New Network™ (IP packet-based) and the traditional circuit-based telephone network.

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Brooktrout, Inc. continues to execute on industry trends such as movement to IP, movement to speech recognition and unified communications

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Communications & Equipment

Brooktrout, Inc.

250 First Avenue
Needham, MA 02494
Phone: 781-449-4100

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Eric R. Giler

Interview conducted by:
Diane Reynolds
June 2003

Biography of President and Founder, Eric R. Giler

Eric R. Giler is president and founder of Brooktrout, Inc., where he has successfully led the company since 1984. He is on the Board of Directors of several companies including Netegrity, Inc., and Onset Technology. Mr. Giler also serves on the Executive Committee of the American Electronics Association (AEA) New England Council. In addition, Mr. Giler has served on the board of the Massachusetts Telecommunications Council since its founding, most recently as Chairman. Mr. Giler is a frequent speaker on topics such as The New Network™, bridging the gap between voice and data, how to run a successful business, and other technology and business-related subjects. Mr. Giler holds a bachelor's of science degree from Carnegie-Mellon University and a master's degree in business administration from Harvard Business School.

Company Profile:

Brooktrout, Inc., headquartered in Needham, MA, delivers innovative hardware and software platforms that enable the development of New Network™ applications, systems and services. The Company has a leadership position in building the New Network by offering core technologies that marry the telephone to the data network. Brooktrout believes its solid focus on customers, significant first-to-market products, and strategic acquisitions make it the partner of choice for today’s hottest communications service providers and enterprise application providers. Brooktrout is traded publicly on NASDAQ under the symbol BRKT.

Since1984 Brooktrout has developed innovative hardware and software platforms that OEMs, developers and corporate IT managers build into their communications systems. Customers worldwide incorporate Brooktrout products into applications, systems, and services that allow voice, fax and data to be distributed over the New Network™ (IP packet-based) and the traditional circuit-based telephone network.

Products include:
The TR1034™ delivers fast 33.6Kbps fax transmission speeds, up to 30 fax channels per board, and features an onboard T1/E1 interface- all with the performance and reliability that has made Brooktrout the world leader in intelligent fax boards. Unparalleled performance, carrier-grade reliability, single-slot footprint, and the flexibility to adapt to changing needs all contribute to reducing the overall cost of ownership, simplifying installation, minimizing ongoing management, and providing the highest level of dependable performance.

The TR114™ Series are intelligent boards designed for high-performance fax and fax/voice messaging systems. The TR114 provides up to 16 intelligent fax and voice channels offering full fax and voice processing on each. The TR114 is one of the most widely used intelligent fax boards in the industry. The TR114 is used in New Network applications such as IP- and Web-based messaging.

The TruFax® Series is a line of intelligent fax boards that offer small to medium-sized businesses and departmental workgroups dependable fax capabilities for a variety of computer based fax applications, such as network fax and fax broadcast. The TruFax Series offers a level of reliability and fax performance that business can depend on at an economical price point for low volume fax traffic.

Together with Shared Fax on Windows Server 2003, Brooktrout’s TruFax and TR114 intelligent fax boards enable businesses to confidentially and securely send and receive faxes directly on their desktops, eliminating the costs, complications and lost time associated with walk-up, stand-alone fax machines. The Shared Fax product for Microsoft brings proven reliable performance to BackOffice and Small Business Server. Brooktrout’s TruFax and TR114 intelligent fax boards are also supported on Microsoft’s Small Business Server 2000 and BackOffice Server 2000, providing the reliability and affordability required by today’s small and large businesses.

The Netaccess® PRI-PCI cards with Instant ISDN Software provide the industry’s most robust digital WAN access feature set. Users can connect Peripheral Component Interconnect (PCI) based systems to digital networks through a variety of protocols, including T1/E1, Primary Rate ISDN, Frame Relay, raw data mode, and others.

The NS700™ platform is the leading OEM solution for advanced SS7 call control and non-circuit related signaling platforms deployed in over 70 countries worldwide and available in PCI and cPCI formats. Each board within the NS700 product line can support up to a total of 32 SS7 signaling lines on-board. Brooktrout’s extensive range of SS7 modules allows developers to leverage the capabilities of the SS7 network and develop carrier-grade applications for SS7 circuit-switched call control, SS7/IP convergence, GSM MAP SMS, CDMA IS41, and INAP Intelligent Network devices.
The TR2020™ platform is designed to offer a broad range of on-board TDM to IP packetization capabilities. With a full suite of codes, echo cancellation and a proven set of signaling protocols, it is a comprehensive platform for TDM / IP media conversion. The TR2020 also offers a number of other functions including voice compression and interactive voice response (IVR), as well as fax and data relay. The TR2020 also included embedded support for VQmon TM, developed by Telchemy Inc., and adopted by ETSI. VQmon TM is a monitoring agent that incorporates unique, non-intrusive voice quality measurement techniques. Integrated VQmon QoS monitoring capability allows service providers to measure voice quality by channel in real-time, a key foundation for managing QoS in the network.

The TR1000™ platform provides advanced media processing, call control and network connectivity ideally suited for a wide variety of speech, voice, messaging, conferencing, and fax applications. It is specifically designed to support multiple, scalable services within both the enterprise and service provider environments, and to provide a seamless migration path from circuit to packet networks. The performance and flexibility of this feature-rich platform allows systems to scale in both density and functionality to meet evolving technology and business requirements.

CEOCFOinterviews: Mr. Giler, please tell us about Brooktrout.

Mr. Giler: “Let me walk you through what I call, ‘Brooktrout at a glance’. Brooktrout builds enabling technology for communications applications. Very simply, we design and build circuit boards and software that go into some of today’s and tomorrow’s most exciting telecommunications applications. From a business perspective, we did $73.5 million dollars in revenue in 2002. We have $46 million dollars in cash and marketable securities, and no long-term debt; we have 12.3 million shares outstanding. The company was founded in 1984 and we have been public since 1992. I am one of the company’s co-founders. We are a global company based out of Massachusetts with operations in California and New Hampshire; our international operations are based in Brussels, Belgium, and we have several sales offices worldwide. At the end of the first quarter of 2003, our employee count was 230 people worldwide and we sell to about 400 customers per quarter.”

CEOCFOinterviews: Please tell us about some of the trends in the marketplace.

Mr. Giler: “One trend in the marketplace is a huge movement to the Internet and other IP networks. Most people think of the Internet primarily as a data communications vehicle, but we have also seen a huge movement to move voice traffic over the Internet. A lot of the voice applications that were traditionally done over the circuit-switched telephone network are now being done over the Internet. The second market trend is the adoption of speech recognition or the ability for a computer to understand who is speaking on a telephone call. That’s becoming the user interface for recognizing what someone is saying. Finally, there have been a number of advances in tying all of the different types of messaging together, for example, tying your voice mail to your email. In all of those areas, Brooktrout builds products that enable OEM developers and IT managers build communication applications”

CEOCFOinterviews: What is driving companies to come to Brooktrout for these products?

Mr. Giler: “The uncertain business environment, the weak economy, and general risk avoidance corporations are driving companies to come to Brooktrout.  Many of these corporations are outsourcing technology development to Brooktrout that they have previously developed internally, not just for our technology, but because of the current business environment. There have been surveys done over the last year of customers and potential customers of Brooktrout’s, which indicate that over the next three years companies with more than $250 million dollars in sales plan to reduce the number of R&D professionals engaged in enabling technology development by over 50%. It is a very powerful movement from a business perspective to outsource enabling technology. Our products are used both in the Internet or the IP network; they are used inside either by the enterprise or the business; and they are also used on the public switched telephone network, the traditional telephone service that most people get.”

CEOCFOinterviews: Can you give us an example of how your products are used or applied in each area?

Mr. Giler: “In the public switched network, recently, the telephone companies have come up with a new service called ‘Call Intercept’. A lot of people who have caller ID from the telephone company have become disenchanted with it because of the number of telephone calls that come in where you cannot figure out who the calls are coming from.  There are calls that are blocked out of area caller, wireless caller, etc., which will appear on the screen and the person does not know who is calling. The phone companies, in order to combat losing these customers for caller ID, because of the difficulties in figuring out who is calling, have developed the new Call Intercept service. When a telephone call comes in from one of these unidentified sources, the telephone at the consumer’s residence never even rings. A voice message is played back to the caller instructing them that the party they are calling doesn’t take calls from telemarketers and that they must unblock their phone number if they wish to connect. There were 450 million of those types of calls turned away in the last few months. Every one of those calls had a voice message played back to the caller and every one of those went through a Brooktrout circuit board. That is an example of how our products are used in the public network.”

CEOCFOinterviews: What about at the enterprise network?

Mr. Giler: “At the enterprise network, what call center operators are beginning to do is plug a microphone and headphone into the computer instead of having the separate phone line and separate phone number. Call centers are those places like customer service centers or tech support centers where people who make phone calls are hooked up to computers at the same time. These call centers have replaced their telephone systems with a Brooktrout IP or Internet Protocol technology product, which essentially allows those telephone calls to be routed over the computer network from the call center operator. Finally in the enterprise network side, if today you are receiving your faxes and they automatically go into your email, that is done by a Brooktrout product.  Brooktrout has about 75% of market share of what is called the local area network fax market. In addition, this combination of facsimile in e-mail is continuing to grow substantially as the email market continues to grow.”

CEOCFOinterviews: How closely do you work with your customers and how vital is the growth of their business to the growth of yours?

Mr. Giler: “Essentially we sell our equipment on an O.E.M., Original Equipment Manufacturing basis, which means that our customer’s success is our success, so we are very, very tightly linked. You can view that as positive or negative. We tend to view it very positively because we have lots of customers. One of the things I first mentioned is that we sell to more than 400 customers per quarter. Therefore, we have safety and diversity in the number of accounts that we sell to and we are an integral part of their success. The development costs to switch from our product to another product are very high, so most customers stick with us from the inception of the product through the product’s life cycle. So once we design our product into a partner’s application, it remains there for many years, so the revenue stream becomes predictable based of course upon the success of the customer, so we try to get as many customers as possible.”

CEOCFOinterviews: Do you have long term contracts with them or is it on an as need basis?

Mr. Giler: Typically for an OEM customer, the contracts are on an as needed basis, so there are no take-or-pay contracts in our industry and it is very uncommon to have that. That is not to say that you don’t get a predictable revenue stream because to the extent that many of these customers have very predictable business cycles, it’s possible to aggregate all of them to come up with reasonable forecasts for our business. We only forecast our business at one quarter publicly; internally we have business plans that go out over three years.”

CEOCFOinterviews: How much time and energy are you spending on increasing existing business and expanding into new markets?

Mr. Giler: “We spend a fair amount of time on both. We have a direct sales force that covers accounts worldwide so we spend time globally working various accounts and potential opportunities as well as investing in new technology areas that are connected with what we already do.”

CEOCFOinterviews: Have current trends in the economy affected your business either positively or negatively?

Mr. Giler: “The communications market in general has had a significant sell off, both investor wise as well as company sales wise. Our sales are bumping along the bottom, but we don’t think it is getting any worse. However, it will be a while before it completely recovers. However, it is worth pointing out that we designed our business so that it will actually grow in a time of general decline and we believe that it is possible over the next few years for our business to grow even though the rest of the communications industry is flat or declining slightly.”

CEOCFOinterviews: How do you keep up with the rapid changes in technology?

Mr. Giler: “Very simply, we invest a huge percentage of our sales dollars in research and development.   We spend approximately $15 million dollars on R&D and for a company that is doing $73 million dollars in sales that is a pretty substantial amount.”

CEOCFOinterviews: Do you see that slowing down over time as things settle?

Mr. Giler: “With the company’s business model, our current spending of $15 million on R&D, equates to a sales rate of $100 million a year. Therefore, we are spending a little bit in advance to our business model, but our business model would suggest that we spend about 15 cents on the dollar for R&D.”

CEOCFOinterviews: Do you see further global expansion?

Mr. Giler: “From a global perspective, we have good business relationships in Japan where I would look for us to continue to improve upon. We would also like to eventually get more aggressive in terms of going into the rest of the far eastern countries. We already have a well-established presence in North America and Europe.”

CEOCFOinterviews: As the demand becomes higher are you going to be able to fulfill it?  Do you have enough employees?

Mr. Giler: “The answer to that is on two sides. The first is a substantial manufacturing capacity. We use external turnkey subcontractors; one of our key external turnkey subcontractors is SCI Sanmena, which is a very large global subcontract electronics manufacturer. So they build our designs on a turnkey basis and then give them back to us. Therefore, the capacity from a manufacturing perspective is not an issue. On the other side, our business is very scalable. Most of the head count increases that we would do as our sales increase would be talent in engineering, sales and marketing. Fortunately, the economy is in a very different situation than it was a few years ago. There are very qualified people available now, many more who would like to work at Brooktrout than we could afford to put on, so we don’t foresee there being a labor shortage problem as the sales go up either.”

CEOCFOinterviews: Because a lot of the products are subcontracted out, how do you control the quality of the products?

Mr. Giler: “We do incoming test and inspection here at Brooktrout, but most people will tell you that you have to design the quality in; you can’t test the quality. It’s much more effective when you are doing your basic engineering to design the quality control into the product. We do a lot of automated tests, so our equipment is all tested by computer systems. It provides a very high degree of outgoing product quality.”

CEOCFOinterviews: With all of the products that you have currently, do you see yourselves developing new ones or concentrating on the ones that you already have?

Mr. Giler: “It’s not so much a revolution as an evolution. As I mentioned before, a very large percentage of dollars goes to R&D for developing new products.  We try to build on the technology that we’ve already developed but by the same token we continue to try to get into the new product lines, because if you don’t, then your customers, or partners, will be forced to do it internally. That is not what we want to happen. We want our customers to continue to outsource their development and come to us for the new products they need.”

CEOCFOinterviews: Do your customers give you input and then you develop on that?

Mr. Giler: “Some comes from our customers, some comes from our R&D staff, some comes from market research, and I can say that it is equally divided, but we do get a lot of customer input in terms of what we need to develop.”

CEOCFOinterviews: Have investment trends affected Brooktrout?

Mr. Giler: “I think it steadies itself out just based on Brooktrout’s stock price, having been relatively stable during these times. I do believe, however, that people are still very wary of investing in telecommunication companies, and rightfully so.  So, it will be some time before investor confidence and the industry at large improves.”

CEOCFOinterviews: What would you say to a potential investor?

Mr. Giler: “An investment in our company is a long-term proposition. We believe over the long term, if you believe in the industry trends such as movement to IP, movement to speech recognition and unified communications, and if you believe those trends are going to continue and Brooktrout is capable of continuing to execute on those, our business will grow over the long-term. Growth means profitability, and profitability helps to justify your investment in the stock.”

CEOCFOinterviews: Plus, with all of the consolidation that did go on, the companies that are left are very strong and I think that people have to realize that the worst is over.

Mr. Giler: “Oh yes, and if you look at Brooktrout’s balance sheet that’s a very good indicator of staying power and a continuing positive cash flow that we have been able to generate even with small loses.”

CEOCFOinterviews: In closing, what are your competitive advantages?

Mr. Giler: “There are very few companies that participate in our sector. Most of the companies that we would compete with are the companies that we sell to who would use their own internal R&D staffs. All I would do is to point any potential investor to look at and see what the cut backs in the R&D spending in the larger communication companies and that is where Brooktrout’s competitive opportunity lies.”


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To view Releases highlight & left click on the company name!

Brooktrout Technology Delivers BRI V.34 Fax Developer Kits

Releases BRI V.34 TR1034, BRI V.17 TruFax; also releases TR1034 V.34 analog for North America

NEEDHAM, Mass., January 24, 2004Brooktrout Technology, Inc., the worldwide market leader of intelligent fax boards, today announced that developer kits for its new BRI (basic rate interface) configurations of its TR1034™ and TruFax® intelligent fax boards are now available for application developers. Brooktrout’s TR1034 two- and four-channel BRI V.34 versions fulfill the needs of small to medium sized customers who want a high-speed network fax solution. Brooktrout’s TruFax two- and four-channel BRI V.17 versions are geared to small and medium businesses that want a higher bandwidth, high speed, low-cost network fax solution without reverting to analog. Brooktrout also released developer kits for its two-, four- and eight-channel analog versions of its TR1034 for customers who want a high-speed fax solution, but do not require a digital leased subscriber line.

Posted: 2/1/04 -

Brooktrout Delivers Industry’s First Software-Based Expansion Capability for LAN Fax

Technology Expansion Capability Enables Customers to Increase Board Features Through Software Downloads

NEEDHAM, Mass., January 14, 2004Brooktrout Technology, Inc., the worldwide market leader of intelligent fax boards, today announced its Technology Expansion Capability (TEC), which enables customers to increase board features and functionality simply by downloading and installing a new software license key. The first products to be TEC-enabled by Brooktrout are the fractional T1/E1 configurations of its TR1034™ series intelligent fax boards. Now customers can increase channel densities on their existing TR1034 fax board without the need to purchase additional hardware.

Posted: 2/1/04 -

Brooktrout Intelligent Fax Boards Support Newly Released
Microsoft Windows Small Business Server 2003

Brooktrout’s TR114 and TruFax Intelligent Fax Boards Certified to Support Shared Fax Capabilities of Microsoft Windows
Small Business Server 2003

NEEDHAM, Mass., November 4, 2003— Brooktrout Technology, Inc., the worldwide market leader of intelligent fax boards, today announced that its TR114™ and TruFax® intelligent fax boards support the newly released Microsoft Windows Small Business Server 2003 with Microsoft Shared Fax. Brooktrout’s intelligent fax boards allow users to cost-effectively operate their Windows Small Business Server 2003 as a reliable network fax communications center. This winning combination allows users to set a reliable network fax server to confidentially and securely send and receive faxes directly to their desktops eliminating the costs, complications and lost time associated with walk-up, stand-alone
fax machines.

Posted: 12/11/03 -

Brooktrout Announces
Third Quarter 2003 Results

NEEDHAM, Mass., October 16, 2003Brooktrout, Inc. (NASDAQ: BRKT), a leading provider of innovative hardware and software platforms that enable applications for the New NetworkÔ, today reported that revenue for the third quarter of 2003 was $19,446,000 compared to $18,510,000 for the third quarter of 2002.  The company’s net income in the third quarter of 2003 was $917,000, or $0.07 per share, compared to a net loss of $482,000, or $0.04 per share, for the same period in 2002.  Net income in the third quarter of 2003 includes a one-time after tax gain of $309,000 in connection with the sale of an investment.

Posted: 12/11/03 -




 Brooktrout Announces Stock Repurchase Program

NEEDHAM, Mass., October 16, 2003 – Brooktrout, Inc. (NASDAQ: BRKT), a leading provider of innovative hardware and software platforms that enable applications for the New NetworkÔ, today announced that its Board of Directors has authorized the repurchase of up to 1,000,000 shares of the company’s common stock from time to time on the open market or in privately negotiated transactions.

Posted: 12/11/03 -

Brooktrout’s TR1000 Speech Processing Platform Awarded
 Best Voice Platform for Carriers

Speech Technology Magazine Readers Recognize Brooktrout’s Leadership in Voice and Speech

NEEDHAM, Mass., October 8, 2003 — Brooktrout Technology, Inc., a leading supplier of media processing, network interface, call control and signal processing products, today announced that its TR1000™ speech processing platform was awarded a Speech Solution Award for Best Voice Platform for Carriers at last week’s SpeechTEK conference in New York. The Speech Solutions Awards, sponsored by Speech Technology Magazine, are presented to companies for outstanding accomplishments in bringing new products and services to the marketplace, and are selected by the publication’s readers.

Posted: 12/11/03 -
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