C-COM Satellite Systems, Inc. (CMI-TSXV)

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July 31, 2009 Issue

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With A Who’s Who Of Corporations And Government Agencies Around The World As Clients, C-COM Has Taken High-Speed Internet Connectivity To Another Level With Their iNetVu™ Mobile Antenna Platform For Vehicles That Allows The Delivery Of Data, Video And VoIP Use In Remote Regions Of The World

Company Profile:

C-COM Satellite Systems Inc. is a leader in the development and deployment of commercial grade mobile satellite-based technology for the delivery of two-way high-speed Internet, VoIP and Video services into vehicles. C-COM has developed a unique proprietary Mobile auto-deploying (iNetVu(TM)) antenna that allows the delivery of high-speed satellite based Internet services into vehicles while stationary virtually anywhere where one can drive. The iNetVu Mobile antenna has also been adapted to be deployable from transportable platforms. The company's satellite-based products and services deliver high-quality, cost-effective solutions for both fixed and mobile applications throughout the world.

Dr. Leslie Klein, P.Eng.
Chief Executive Officer
Leslie Klein is the co- founder, President and CEO of C-COM Satellite Systems Inc. He is an Electrical (Professional) Engineer with MBA and Ph.D. degrees. Dr. Klein was employed by such notable corporations as Hewlett Packard (NYSE: HPQ), IBM (NYSE: IBM), Control Data Corporation, and Bell Northern Research (now part of Nortel Networks) and has been involved in the high-technology business over the past 35 years and is a founder of a number of successful technology companies.


 

Telecommunications
Satellite Systems
(CMI-TSXV)

C-COM Satellite Systems, Inc.
2574 Sheffield Road
Ottawa, ON CA K1B 3V7
 

Interview conducted by: Lynn Fosse, Senior Editor, CEOCFOinterviews.com, Published – July 31, 2009

CEOCFO: Dr. Klein, what was the vision at the start for C-COM, and where are you today?

Dr. Klein: “C-COM was established in 1997 for the purpose of delivering high-speed internet into vehicles. At that time the satellite technology that was available was quite expensive and did not lend itself to the commercial use for delivery of high-speed internet into vehicles. It took C-COM about three years before the technology caught up with what the company wanted to do. In 2000, the company went public with the idea of implementing a technology that would make it possible to deliver high-speed internet connectivity in vehicles over satellite. The company designed a system that was capable of delivering high-speed Internet over satellite for vehicles in motion by using satellite on the downstream and cellular on the upload.

C-COM also designed a fully satellite based system for the Canadian Coast Guard in early 2000, demonstrating that high-speed Internet could be delivered over satellite into a moving ship at a reasonable cost. In 2000 when C-COM went public on the Toronto Stock Exchange, we also signed an agreement with Hughes Network Systems, from the United States, which allowed us to resell their direct two-way satellite services. C-COM was one of the first resellers of this revolutionary 2 way satellite service and is to this day a service provider with close to 1000 fixed customers from Guatemala to Alaska.

This new low cost technology made it possible for us to implement the technology we were waiting for and allow us to commercialize into what today is the iNetVu™ Mobile platform. This antenna system makes it possible to deliver high-speed internet into vehicles, while they are stationary.”

CEOCFO: Who is using your services today?

Dr. Klein: “Our services today are used around the world. The company exports 95% of its products from Canada. Our customers are the Who’s Who of corporations, and government agencies around the world. We have over 2,200 systems deployed in locations such as Siberia, Saudi Arabia, China and Australia, just to name a few.

Many of the companies that use them are the military, disaster management organizations, fire departments and a number of government agencies like FEMA, FBI, the US Navy, the US Army, NATO forces, Canadian and British military, but also emergency management companies from the Katrina disaster all the way to the Chinese earthquake, television stations, ambulances, etc.

There are many vertical markets; they are virtually limitless because essentially, what we are doing is delivering high-speed internet into areas where there is absolutely no connectivity. Not only do we deliver Internet through this antenna, but you can also have VoIP, video, data, email, and of course everything that you normally take for granted these days when you work from your office or home.”

CEOCFO: What is it that you physically provide; is it just the antenna or is there other equipment?

Dr. Klein: “The company manufactures the antenna and the controller that makes the antenna work with a simple press of a button. This is what we call ‘Satellite for dummies’, but essentially it is very complex robotic system that is simple and easy to operate. It replaces a skilled installer who would take anywhere from two to three hours to set up and point the antenna to the proper satellite. The C-COM iNetVu system does it with a push of the button in less than two minutes, so essentially anybody can use it from oil drilling to ambulance drives to firemen who operate from remote locations that need connectivity. With the press of a button, the antenna actually opens up, and within two minutes finds the satellite, establishes internet connectivity and provides instant communication.

C-COM sells the antenna systems through resellers around the world who bundle it with a number of different technologies they sell form cameras, network computers, satellite news gathering equipment, decoders, modulators, demodulators etc., for different applications. Essentially what we are delivering inside the vehicle is connectivity, pretty much the same as the cable company delivers to you at home - the cable modem and then you plug into your laptop and than add video equipment, VoIP telephones etc.

We are providing pretty much the same ability but making it mobile. Most of our resellers essentially are satellite service providers, so they also deliver the satellite link, the satellite modem and they provide a complete turnkey solution to the customer. Some of our customers actually are delivering entire custom built vehicles equipped with antenna and all of the hardware required by the customer inside the vehicle.”

CEOCFO: Do you have any competitors for internet on a vehicle?

Dr. Klein: “There is not much competition in the market segment we are addressing (high quality, high reliability with exceptional worldwide support).

There are a few companies in this market, but their products tend to be much more expensive or verging on being obsolete. Most only provide half of the solution and purchase the rest form other sources. C-COM manufacturers and supports all of the equipment it sells and offers the latest and most advanced technology product available today.

We have come into this marketplace with the intention of establishing a market presence in a segment of the market that before the iNetVu could not afford these types of products. Our products range in price from 6,000 all the way up to $35,000. The antennas that were previously in the marketplace were in the hundreds of thousands of dollars.

Most of these high end antennas were deployed by the military and the commercial segment of the market neglected due to the cost of these antennas. C-COM has brought down the cost of the antennas to the level where a school can use it for a school bus, a library can also use it and so can a mobile bank for use as a mobile ATM services for customers who are in locations where they want cash, but there are no banks available.”

CEOCFO: How important is the customer support aspect of what you do?

Dr. Klein: “Customer support is extremely important because these systems are quite often providing life and death type communication capability, especially in emergency situations; the ambulances, fire department, emergency management and police forces. Most of the frontline customer support is generally provided by the resellers, so if the customer is located in South Africa for example, our reseller there Grintek- Saab would sell, install and support the customer. They would know the customer, know his requirements, and offer him first level support. If they have problems that they cannot resolve they obviously will call us. We also have a 24/7 technical support center from which we can assist resellers and their customers, should they require it.

The equipment is extremely reliable, but of course things can and go wrong with mechanical products as well as with satellite services. In such cases the satellite service provider (who is quite often also the reseller of the iNetVu will try to sort the problem out and assist his customer before asking us for support. The antenna systems have been designed to be easily field repairable and work very well in the harsh climates of Siberia and Northern Canada as well as the in the extreme heat of the deserts of Sahara and Australia.”

CEOCFO: You have had an exceptional quarter, revenues increased by 78%, and I see it is your 21^st consecutive profitable quarter; what is the financial picture and how do you continue on the same track?
Dr. Klein: “C-COM has been profitable for 21 consecutive quarters and we intend to continue staying profitable. We are opening up new markets and trying to get into areas where satellite technology is very important such as in the Asia Pacific where there is very little infrastructure. Most of our revenues this past quarter came from those countries (India, Pakistan, Vietnam and China), where we are the leading suppliers of this technology. There is a huge potential market there for this type of product from the military to disaster management, police, fire, news gathering etc. We expect this market to continuer be a large potential market for us and we intend to continue to sign up resellers in these regions.”

CEOCFO: What are the barriers to entry?

Dr. Klein: “The barrier to entry is probably the time that took us to develop these technologies (about 4-6 years). The controller technology has evolved over this time and inn order to duplicate what we developed it would take someone this long to get to where we are today.

There are probably about fifteen or twenty different satellite modem manufacturers in the market today and our controller works with most of these and we are developing new interfaces for these on regular bases and updating the new ones as they come on the market.

It takes time to do this, as the antennas we sell have to work with a variety of modems used around the world and they have to work seamlessly.

Since the antenna, system works hand-in-hand with the modem, in order to provide a very safe communication over the satellite to the user the controller has to operate seamlessly with the modem. In order to develop this technology, it takes time. It is not possible to short circuit this development and this is where the barriers to entry come from. We continue developing new interfaces for these new modems on a regular basis, so it is a continual process and that is probably the biggest barrier to entry.”

CEOCFO: Why should potential investors look at C-COM?

Dr. Klein: “I think the last financial report says it all; you can see our revenues have increased by 78% in this last quarter year over year and we have also generated significant profit. This is our 21^st profitable quarter and we have no debt. The company has a significant amount of cash on hand and we believe that our stock is tremendously undervalued.

The company outsources all of its manufacturing and is able to generate significant additional sales with the existing work force, which would translate into higher profitability as sales increase.

The market obviously wants the products that we sell as we are selling more and more of it and much many of the sales go to repeat customers. For example, one of our biggest customers is Halliburton, the oil and gas service company. They have over 160 systems, and as you can imagine there are other oil and service companies similar to Halliburton who will be buying products from us. The same goes for fire departments, police forces, emergency management organizations and satellite newsgathering organizations around the world. The market is large and it is worldwide. The companies overhead is relatively low and the business is a high margin operation with a huge  upside potential in sales.”

CEOCFO: In closing, what might people misunderstand about C-COM?

Dr. Klein: “People looking at C-COM for the first time may not understand the technology. If I did not describe it to you, and let you go on our website and see pictures and see that these antennas sit on all types of trucks and vehicles from China to Pakistan, Russia, India, newsgathering vehicles, ambulances, Police vehicles, fire department vehicles, you would just not understand it. Therefore, people need to comprehend that what we are doing is delivering communication into areas where there is absolutely no communication available, and when I say communication I do not mean cell phone communication, I am talking about large amounts of bandwidth that is required today in any commercial application.

We provide far more bandwidth than what you probably can get at home. Most of our customers require tremendous amounts of bandwidth to be able to do their job properly and this bandwidth is not generally available through other than satellite and is not deliverable into a vehicle without an antenna system like ours.”

disclaimers

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“People looking at C-COM for the first time may not understand the technology. If I did not describe it to you, and let you go on our website and see pictures and see that these antennas sit on all types of trucks and vehicles from China to Pakistan, Russia, India, newsgathering vehicles, ambulances, Police vehicles, fire department vehicles, you would just not understand it. Therefore, people need to comprehend that what we are doing is delivering communication into areas where there is absolutely no communication available, and when I say communication I do not mean cell phone communication, I am talking about large amounts of bandwidth that is required today in any commercial application.” - Dr. Leslie Klein, P.Eng.