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CEOCFO CEOCFO Monthly Analyst |
"To print this page go to file and left
click on print" Mission
critical networking
Technology Network Equipment Hubert “Bert” Whyte
Interview
conducted by: Biography
of Hubert “Bert” Whyte:
Bert
Whyte has served as a Director and as President and Chief Executive Officer of the Company
since June 1, 1999. From 1994 until he joined
the Company, Mr. Whyte served as President and CEO of Advanced Computer Communications
(ACC), where he created a new vision and strategy before initiating the acquisition of ACC
by Ericsson for approximately $290 million. Prior
to joining ACC, Mr. Whyte served as Vice President and General Manager of the Access
Products unit of Newbridge Networks Corporation. Earlier
in his career, Mr. Whyte gained industry experience with British Telecom, Ericsson, Shell
Oil, Business Intelligence Services, Mitel and Siemens. CEOCFOinterviews: Tell us
about the new Network Technologies, Inc. Mr. Whyte: net.com, NWK
on the New York Stock Exchange, has been around about eighteen years. The company was incredibly successful in the late
80’s to early 90’s but started to decline in the mid 90’s. I came in two
years ago to try and restart the company in a new direction in networking. The company has a tremendous reputation with its
existing product line and has sold, and continues to sell, to organizations around the
world with mission critical networking needs, such as Visa, Merrill Lynch, American
Airlines, Reuters, and many government groups like the defense and intelligence agencies. However, the market for that circuit-based
technology has been declining for the last eight years and what we needed to do was
develop new technology and build a strategy towards new opportunities. So, we made a
decision about two years ago to focus on the service creation market. Service creation is the ability for users and
service providers to define and have flexible control of the network that is presented to
them. We focused on service creation in the
emerging broadband world because that’s the future and the best opportunity for the
company’s growth. We built a product
called SCREAM (Service Creation Manager). We launched our new SCREAM products in the
middle of 2001 and we are currently in trials. We
really turned the company around from where it was two years ago to a new direction and
opportunity and I’m glad to say we are, as we were eighteen years ago, at the
forefront of technology. CEOCFOinterviews: As far as the other products the company had
prior to SCREAM, do you still deal in those products or has this company taken a whole new direction? Mr. Whyte: The original
products still provide excellent customer solutions.
They are very reliable products. They
provide a different networking technology that has basically stabilized from a revenue
perspective. Moreover, the tragic events of
the 11th of September have created a demand in the short term for these
products because of their reliability. However,
the strategy of get ting to the broadband service creation market remains our focus. So, ultimately our success depends on our new
products. We have to be aware of that as we
move forward. CEOCFOinterviews: Why did you reduce the workforce by 10% at the
beginning of Q3? Mr. Whyte: When I
joined the company, there were more than 1400 people, now there are just under 500 people,
so we have dramatically reduced the workforce overall.
Our actions at the beginning of this quarter were to pull down our model
from an expense point of view because of the economic slowdown. Although our revenue grew
last quarter from the prior quarter, we are obviously aware that there is a decline in
spending by our customers. We have to keep
the company intact. We have to get to a
situation where we are cash flow neutral. That’s
really our target over the next several months. CEOCFOinterviews: But you were saying the demand has increased
because of the recent tragedies. Some
people may think this is the time to hold on to those employees and get things moving. Mr. Whyte: We’ve
been selling and manufacturing those products for eighteen years and we have it down to an
art. We know how to provide those products
rapidly. Plus, there may only be a short-term
improvement in product sales for us as a result of the events of September 11. We still have to protect the company going
forward. Though we may get a little bit of a
stimulus based on the government’s demand, in the long term success will be
determined by the broadband products. The carriers’ buying trend has declined over
the last year and we are trying to protect our position by taking that action. CEOCFOinterviews: There is another product you have called SHOUTIP? Mr. Whyte: We have an
IP telephony product that is quite loud, called SHOUTIP and you can
tell we are not being quiet about our opportunities. We sell this product to progressive
carriers. These carriers are also slowing their capital spending, so we’ve been
caught on a two-way downdraft. Both SCREAM
and SHOUTIP are relatively new products and they clearly will take time to gain traction
in the marketplace. What we’ve benefited
from over the last two quarters is the stabilization of our existing products but our
growth in the long term will be dependant on the traction and success of the new products. That is where most of our focus is right now. CEOCFOinterviews: What are you doing to advertise these products? As you stated, they are not well known yet. What are you doing to make them better known to
the customers who will benefit from this? Mr. Whyte: Our
focus is carrier service providers like Verizon and SBC, they are the key customers. They spend, each of them, around $8 billion
dollars or more a year on capital equipment. Their
business depends on investment all of the time in new networks so they can create new
revenue. So, our focus is on them. We target them from a PR and advertising
perspective. Indeed, we have just received
four awards for our SCREAM product, including product of the year awards from Internet
Telephony, Communications Solutions, and Communications Convergence, and Australia’s
highest award for engineering achievement for the ASICs in that product. Service creation,
a concept we started two years ago, didn’t get much airtime last year. All they (the carriers) were thinking about was
bigger, faster, fatter pipes. But now they
really are focused on service, the delivery of service, differentiation of service from
their competitors, so we are starting to really resonate with those customers. They are our target and the sales process is long,
but the potential is phenomenal for the big carriers. CEOCFOinterviews: Other than focusing on the two products, SHOUTIP
and SCREAM, what other direction will this company be heading in next? Mr. Whyte: I think we
have our hands full just with SCREAM, which is a major innovation in networking
technology. The product we developed here
will become a critical part of the new networks that the service providers will deploy. I
estimate a $20 billion dollar market opportunity in the next five years. We are going to push hard to make our mark there,
so, that is going to be our focus. I think
once that is done, and in this industry it is difficult to look more than two years ahead,
we will be on to something new. CEOCFOinterviews: How important are the partnerships that you
currently have? Mr. Whyte: Buidling
strong partnerships is key. We are trying to
build a stronger relationship with the large incumbent vendors, the suppliers to the large
service providers. We are talking to a number
of them at this time. They are also slow
because they are large but we have some very good activity with them. They help us get into the carriers faster because
they have a history with those customers. CEOCFOinterviews: Do you rely on one more than other? Mr. Whyte: We are going to try and take one at a time,
but certainly there is no reason why we can’t have multiple partners. CEOCFOinterviews: How much time do you put into providing service
and support for your customers? Mr. Whyte: We have one
of the industry’s best support organizations in the world. Today we manage mission critical networks like
Visa internationally. If the Visa network is not working in South America, for instance,
then they can’t transact money. That is their business and they can’t afford
downtime. Keeping their network operating keeps their business operating. We have built a team that provides good revenue to
the company and offers tremendous skills to those customers in keeping those networks
operating. This is one of the special things that we have at net.com that many other
players don’t have: a very strong, respected and skillful service organization. That
doesn’t happen overnight. CEOCFOinterviews: I was reading somewhere that you are in 75
different countries. Mr. Whyte: Yes.
We are all over the world: in North America, all over Europe, South America, Asia, and the
Middle East. Visa stretches over 100
countries in itself. In some areas we
partner with service providers. CEOCFOinterviews: Is there any area that you are not currently in
and would like to focus in on? Mr. Whyte: Though we
have a substantial presence here, our challenge is still the US. This is the biggest economy in the world. It’s the most innovative as far as technology
is concerned and it provides the greatest opportunity. A lot of our efforts are focused on
this market. The US is estimated to be about
five times bigger than Europe as a market, which gives you a view on how important this
market is to us. CEOCFOinterviews: So, right now, the majority of the revenue is
coming from the US? Mr. Whyte: Yes,
much of that from our Federal organization, in dealing with the government and defense
communities. CEOCFOinterviews: I’m sure they have been more demanding
nowadays. Mr. Whyte: Yes,
they have. They clearly are trying to improve
their communications across their agencies and since our product is the product of choice
in those agencies, we are working to keep up with that demand. CEOCFOinterviews: Are you able to keep up with that demand? Mr. Whyte: Yes, we are. Many of our people have special clearances so they
can work within those Federal environments. In fact, many of the people in our Federal
group are former military personnel. CEOCFOinterviews: You said, you came into this company two years
ago and you are trying to get it back on its feet. The
two new product lines you are marketing, are you going to stick with internal growth or
are you going to look into acquisitions in the near future? Mr. Whyte: I think
acquisitions can’t be dismissed at this particular time because there are so many
cheap companies out there as a result of the collapse in the technology market. But, for us to really harness and go after them,
we need to get our stock in a better position and as you can see, it’s trading below
cash value at the moment. CEOCFOinterviews: Now, I notice you go by the name of net.com. I know most companies are trying to get away from
the .com. Would you go back to the original name you were using before? Mr. Whyte: No, because
the “net.com” has a particular meaning. The
dot-coms have an awful reputation in the investment community. We changed our name because
we had a very old conservative style and we wanted something new and refreshing. We chose
net.com because that was our domain name, a really great URL. If you look at the logo, it
has a swoosh that goes with it and it defines where we started in the narrowband products,
our legacy business, widening to the broadband market, and then to the Internet, the dot. Ultimately, all communications will be over an IP
type network. This really represents what we
are trying to do. Also, it gave the company a
chance to have a little fun. This company is
a little less conservative than it used to be. We
try to enjoy ourselves in tough times. So,
some people may ask, “would you have chosen a .com after seeing what has
happened?” The answer is yes, because we were not part of the .com frenzy phase. The
Internet will have tremendous significance as we move forward. Unfortunately, some people
got overly optimistic and over hyped with the products they tried to sell and with no real
business plans. The Internet as a marketplace will come back, and will be an enormously
important contributor to the communications industry going forward. CEOCFOinterviews: You have
expanded in the last two years, but do you have the cash flow and or funds to continue? Mr. Whyte: One of the
reasons we took the actions we did at the beginning of the third quarter was to make sure
we had enough runway from a cash point of view. We
did make a lot of investment on the new products and that drains cash reserves. We needed
to slow down that drain to make sure we preserve our cash going forward. What we can see in the next year and a half is
that we are planning to be cash flow neutral over the next several quarters so that cash
will stay in the bank going forward. CEOCFOinterviews: People
want to recognize you as different. What are
you doing to stand apart from your competitors? Mr. Whyte: We
definitely pioneered the service creation idea in broadband. Our architecture is significantly different than
anything out there and there are people who are starting to copy us, but as a whole, the
architecture of the system gives us a leadership position in the market. There is no one doing what we are doing from a
technology point of view. There are lots of
competitors springing up, clearly because the service creation idea is resonating within
the carriers, but, we still have a significant technological advantage. CEOCFOinterviews: Let’s say there is a potential investor who
has never invested before, is looking at your company for the first time. What would you say to that investor to get him/her
excited? Mr. Whyte: Well, I would say the broadband world is going to explode and we are a pioneer in that field. Although it’s slowed down at the moment, it will happen. We have the technology and products now that will start to make the breakthroughs that are necessary in this business. And we are trading under cash at the moment, have a great balance sheet and offer an excellent opportunity.disclaimers |
