2470 Mariner Square Loop,
Alameda CA 94501
510-814-5100



Alan B. Lefkof
President and
Chief Executive Officer

Interview conducted by: 
Diane Reynolds, Co-Publisher

CEOCFOinterviews.com
July 2001

Brief company description and Bio for Alan B. Lefkof, President and CEO:

Netopia, Inc. develops, markets and supports broadband gateways and web platform software designed for small and medium size enterprises, small office/home office customers, and multi-PC households.  Netopia’s targeted technology enables carriers and service providers to deliver bundled, value-added services for acquiring and retaining subscribers in large, fast-growing markets.   These bundled service offerings often include DSL service bundled with backup, bonding, VPN, voice over DSL, and eSite and eStore hosting.

Alan B. Lefkof joined Netopia as President in August 1991 and has been Chief Executive Officer since November 1994. Prior to joining Netopia, Mr. Lefkof was President of GRiD Systems a manufacturer of laptop computers, from October 1989 to August 1991, Chief Financial Officer from March 1987 to September 1989, and Vice President of Marketing from August 1983 to February 1987. Prior to joining GRiD Systems, Mr. Lefkof served as a Management Consultant at McKinsey & Company from July 1977 to January 1982. Mr. Lefkof received a B.S. in computer science from the Massachusetts Institute of Technology in 1975 and an M.B.A. from Harvard Business School in 1977.

CEOCFOinterviews:  Please explain your products and whom you target.

Mr. Lefkof:  Netopia designs, develops, markets and supports Internet products for small and medium enterprises that include companies from two employees to several hundred employees.  We reach these small businesses through service providers and carriers who offer broadband services.   Specifically, we offer both a full line of Internet equipment to create the broadband connection and we also offer value-added software services to create an Internet presence.   

CEOCFOinterviews:  Which of the technology vendors out there do you work with?

Mr. Lefkof:  We consider ourselves the “Switzerland” of DSL.   We are neutral in that we inter-operate with all the major equipment vendors, whether it is Alcatel or Cisco or others.    We fit into any environment that the telephone companies may be using.  

CEOCFOinterviews:  How has the consolidation factor affected your company?

Mr. Lefkof: Now that a number of our competitors have been acquired, it has actually eased the competitive environment. What we find is, even though a lot of the telecommunication carriers are having financial problems, the underlying customer demand is still very high and the underlying growth is still there.  The companies servicing business customers may change, but we will be there to help those providers that survive the economy’s storm. 

CEOCFOinterviews: Are you just targeting small and medium-sized business?

Mr. Lefkof: No, we are beginning our entrée into the high-end residential market, specifically the multi PC household with the need to share a network among multiple devices.  Those homes are now operating more like a small office than a typical home. 

CEOCFOinterviews: What other changes are taking place at Netopia?

Mr. Lefkof:  We are now beginning to offer wireless capabilities with our products.  For example, our DSL routers and DSL integrated access devices will soon have wireless connections built-in.  This allows for network access for multiple PCs and other devices, without the hassles of stringing Ethernet wires throughout the home. 

CEOCFOinterviews:  You, as a company, are more on the back end of things.  Wouldn't you like to be closer to the end customer?

Mr. Lefkof:  We are very well known among service providers that offer broadband to small and mid-sized businesses.  In fact, we are the leaders in our category.  We estimate that we have a 35-40% market share.  There is no need to market our brand directly to the end-user.   

CEOCFOinterviews: Do you do this on a global basis?

Mr. Lefkof:  We do. About 80% of our revenue is North America and about 20% is from outside the US. 

CEOCFOinterviews:  I heard that the largest growing area is outside of the US.  How do you account for that?

Mr. Lefkof:  Europe will be very big with DSL starting this fall.  Asian demand has risen quickly, particularly on the residential side, but we expect it will increase on the business side shortly. 

CEOCFOinterviews:  With demand outside of the US growing so rapidly, are you able to keep up with demand?

Mr. Lefkof:  Yes, we are able to fulfill orders in an average of 15 to 20 days. 

CEOCFOinterviews: Do you do all of the manufacturing of the equipment that you provide to your partners?

Mr. Lefkof:  Yes, we manufacture through subcontractors in Mexico. 

CEOCFOinterviews: How many offices do you currently have?

Mr. Lefkof: We have about 20 offices around the world.  

CEOCFOinterviews:  How much inventory do you keep on hand for your customers?

Mr. Lefkof: We manage inventory tightly and turn it over about 6 - 8 times a year. 

CEOCFOinterviews:  How are you keeping up with the latest DSL technology, particularly voice technology?

Mr. Lefkof: We don’t keep up with the latest in DSL technology; we create it.  It is our specialty.  We have a team of over 100 engineers and product managers creating new inventions and products.  For example, we were the first to create DSL products with voice technology, and we stand poised and ready for its coming demand. 

CEOCFOinterviews:  Retention of engineers was difficult in the tight job market.  Has it eased up?

Mr. Lefkof: It has slowed up a bit in Silicon Valley.  However, we have always had good tenure and retention.  We are proud of our employee loyalty and retention rate.   

CEOCFOinterviews:  Do you have the cash and/or credit to grow this company?

Mr. Lefkof: As of March 31, 2001, we had $51 million in cash.  The company is not burning much, so there is plenty available for our future.  

CEOCFOinterviews:  What makes your company uniquely positioned?

Mr. Lefkof: Netopia's great reputation is based on the quality of the products that we deliver. We are constantly innovating and bringing new features to market. For example, embedded within each router we sell (which looks like a simple piece of hardware), there are over one million lines of software.  Our quality and our software give us our edge. 

CEOCFOinterviews:  You serve small and medium-sized businesses and now also the multi-PC household.  What about the larger companies?

Mr. Lefkof:  We serve larger companies by connecting their various branch offices.  We also connect the large company to their dealers, their franchisees, their retail stores, or service centers.  We do not typically service corporate headquarters.

CEOCFOinterviews:  How are you attracting new customers?

Mr. Lefkof:  Since we work directly with carriers, our goal is to increase the number of carriers that we work with, particularly carriers from overseas.  We met with many of them at the Supercomm trade show.  

CEOCFOinterviews:  Let’s talk about your last quarterly report.  You had a little bit of challenge there.  What has happened since then?

Mr. Lefkof:  Revenue was about $21 million dollars for the March 2001 quarter.   The hardware actually had sequential growth, which is impressive in this economy.  Software licenses were less than expected because of this same environment.  We  predict the next two quarters will be about the same, and then we will begin to see a return to more exciting growth come the December quarter. 

CEOCFOinterviews:  Why in December?   Please explain.

Mr. Lefkof: I think two things will happen.  There is a standard of DSL called G.shdsl.  Because Netopia is at the forefront of this technology, we will be able to capture the demand as it becomes prevalent in this time frame.  Secondly, we expect the uptake in Europe and Asia to occur during that time frame as well. 

CEOCFOinterviews:  With your partners, do you have long-term contracts with them or is it as-needed basis?

Mr. Lefkof: Contracts are typically either one or two years. 

CEOCFOinterviews:  Is the revenue you mentioned coming from hardware sales or services?

Mr. Lefkof:  About 80% of our revenue is hardware and the remaining is software and services. 

CEOCFOinterviews: Do you plan to build up that area a little bit more?

Mr. Lefkof: That certainly is a key point of our value-add and an important component of our total offering. 

CEOCFOinterviews:  I see that you are the interim CFO. Have you found a CFO yet?

Mr. Lefkof: We have a search going on right now so hopefully we will have someone on board soon. 

CEOCFOinterviews:  How are you using your website to benefit your partners?

Mr. Lefkof: There are private sections on our site for our partners, where they can get new downloadable software, special training and answers to questions frequently asked by them.     

CEOCFOinterviews:  Is there anything you would like to do differently than what you are doing today?

Mr. Lefkof: We are in the process of expanding and diversifying our channels.  We've always been very successful with the Internet service providers, and now we are expanding our relationships with the ILECs and IXEs. 

CEOCFOinterviews: Some people aren't knowledgeable about terms like DSL and this new G.dsl.  How are you educating end-users as to what exactly this represents?

Mr. Lefkof: The carriers themselves are the ones who will educate the end-users in their campaigns.  Our goal will be, as always, to help the carrier create a reliable and profitable offering. 

CEOCFOinterviews:  Do your customers ever come back to you with ideas?  Do they every ask if you can alter your services to their needs?

Mr. Lefkof: Sure.   The majority of our enhancement ideas come from the ideas and requests from the carrier customers. 

CEOCFOinterviews: Acquisitions, additional partnerships, joint ventures.   What road do you foresee this company going down as far as growth?

Mr. Lefkof: We are expanding our partnerships and our geographic reach.  Those are the two avenues we are approaching. 

CEOCFOinterviews:  Excite me as a potential investor.  What would you say to me?

Mr. Lefkof: The most important thing to keep in mind is that broadband is alive and well.  Businesses consider broadband critical to their success and DSL is the technology most favored by them. Penetration is still low, less than 5% of the market currently, so we have 95% of the market to go.  It's going to happen and we are going to be there to take advantage of it with our better products, better features, excellent service and great tech support. 

CEOCFOinterviews:  Is your tech support available 24/7?

Mr. Lefkof: We are available 24 hours and 7 days a week to carriers, and twelve hours a day to the end-user. 

CEOCFOinterviews: How accessible is your tech support?

Mr. Lefkof: A live person answers our calls in an average of 30 seconds.  I don’t know if any company that can beat that. 

CEOCFOinterviews: Once you have your CFO in place do you feel you have the management to go forward?

Mr. Lefkof: Yes. 

CEOCFOinterviews:  Do you see any additional changes you would like to make?

Mr. Lefkof: No, we are in good shape. 

CEOCFOinterviews: You joined this company back in 1991, and a lot has changed since then.  What motivated you to keep pushing forward?

Mr. Lefkof: Our major goal was to add value to the small, medium business customer who is usually ignored by the larger companies.  We have proven that we can add a lot of value to this customer base.  Our satisfaction comes from their success. 

CEOCFOinterviews: Are your packages put together so that the small to medium-sized businesses can afford them?

Mr. Lefkof: Packaging of services is often done by the phone company or the carrier themselves.  There are all kinds of options available.  For example, the end-user can buy the DSL equipment up front, rent it on a monthly fee, or finance with alternative ways.  There are many options.

CEOCFOinterviews: Are there any other areas you would like to enter into other than where you are now? 

Mr. Lefkof: There are lots of technologies that are coming out, but we will always keep our focus on the broadband arena. 

CEOCFOinterviews: Thank you.

Mr. Lefkof: Thanks.