I just got a copy of The Business Journal's special edition on the 100 fastest growing companies in the Silicon Valley. [Only in hardcopy.] Com21 ranked fourth, behind eBay, Fatbrain.com, and Actuate Software, and ahead of Onsale, Neomagic, Verisign, Excite, Yahoo, and Nvidia. The supplement is a gargantuan 15 X 11 inches and filled with data on the top 100. Pete's featured in a nearly full-page photo beside the Com21 sign and the text reads:
The recognitions just keep rolling in for Com21, an exciting company in an equally exciting industry.
Among cable modem suppliers, it's been ranked No.3 worldwide by Dataquest Inc. and No. 1 in Europe by Ryan Hankin Kent. It's No. 19 among Cahers Electronics Industry Yearbook's Top 50. And now, it's No. 4 on The Business Journal's annual list of the fastest-growing public companies in Silicon Valley.
"In this very dynamic and emerging cable modem transmission business, which is helping to provide Internet access to hundreds of thousands of subscribers over the cable structure, Com21 is at the cusp both domestically and internationally," said Joe Achramowicz, senior research analyst at Preferred Capital Markets Inc. in San Francisco.
"I like the company from a number of perspectives," he said. "Financially, it has an absolutely phenomenal balance sheet, one of the best in the broadband transmission business. Managerially, it's very solid, from the board of directors on down. And operationally, it provides a strong product and service and is performing extremely well in a huge, high-growth, global market."
Mr. Achramowicz, who recently upgraded his "buy" recommendation on Com21 to a "strong buy," predicts this year's revenue will hit the $100 million mark --- more than double 1998's figure of $48.1 million, which was a 383 percent improvement from 1997.
Guy Scott, a principal and portfolio manager at State Street Global Advisors, apparently concurs. In January, Com21was one of his three choices for the Boston Herald's annual stock-picking face-off. (He and three investment fund managers compete for the best overall portfolio of three stocks at year-end.)
Though it may be standard operating procedure in warp-speed-growth Silicon Valley, these achievements are pretty heady stuff for a company that's not yet past grammar-school age.
Founded in 1992, Com21 has raised more than $35 million in equity since its initial venture capital funding in 1994. In May 1998, the Milpitas-based company went public at $12 per share. The company and its 175 employees have been riding a steady uptrend ever since; the stock closed April 30 at $31.13.
What's behind this phenomenal growth? As always, it begins with a person and an idea.
Com21 co-founder and chairman Paul Baran, widely credited as the inventor of packet switching (the technological basis for the Internet), seems to have a penchant for starting successful businesses. Before Com21, he founded Metricom, Telebit and Equatorial Communications, among others.
"My style is to create some of the technology for a company, hire someone smarter than myself to run the company, and then get the hell out of the way," Mr. Baran said.
Most technology users today want high-speed integration of voice, video and data along a single telecommunications channel, and cable is a key solution. So it's no surprise that pundits are forecasting massive growth in that industry. The estimated installed base of 700,000 to 1 million cable modems in the world today is projected to increase to as many as 16 million by 2000.
Pete Fenner was lured out of his "sailing retirement" to join the Com21 executive team as president and CEO. He'd spent more than 30 years at AT&T Transmission Systems, a $3 billion business unit, where he helped achieve the respected Malcolm Baldrige Award for quality.
"Com21 offered an opportunity to get into what looked like a huge market with a very, very strong group of people --- both in terms of management and technical capability," he said.
Mr. Fenner said Com21 has as many or more engineers focused on voice and data over cable as any of its larger competitors (primarily Motorola and Nortel), and it gives "better performance. Our products are more reliable, more robust."
Com21 started shipping software during the first quarter of 1997. It initially sold its ComUnity Access System as a data system; however, the cable modem product always had the capability to provide integrated voice and data.
Com21 challenged competitors to a cable modem "shootout" at the Western Cable Show alst December, with tests performed by the Tolly Group, an independent third-party lab.
"At the show, we proved we're still the only one that can demonstrate full-quality voice over cable," said Buck Gee, vice president of marketing. "We're the leader in voice-over-cable technology, which is getting a lot of play now that AT&T has acquired TCI." (Telecommunications Inc. is Com21's biggest U.S. customer.)
St. Louis-based Charter Communications, the nation's sixth-largest cable company, is a firm believer in Com21.
"We use their entire line to the fullest," said David Houseman, Charter's marketing director. "We chose them because we believe in their technology and because cable modems are their business, not some product they've added to an existing line-up to see if they can make a business out of it."
Ron Kirkeeng,CEO of Palo Alto Cable Co-Op, is equally enthusiastic.
"We have no upgraded our system and don't have a fiber-optic backbone," he said. "The Com21 modem is one that works well on a system that's not optimum for high-speed data business. We're novices, and Com21's expertise and advice are just great."
Com21's focus has been to make and sell modems and software that help cable operators sell Internet access to homes and small offices. However, the trend broadens Com21's market potential with an immense injection of retail consumers to its business-to-business customer base.
Still, with marketing momentum moving toward individual users, how does Com21 hope to compete effectively with household names such as Motorola?
"As [venture capitalist] John Doerr says, 'Brands on the Internet are important, but all brands are new brands,'" Mr. Fenner said. "Ninety percent of the people who want high-speed Internet access are already online. So if they want expanded service, it's natural for them to click on their cable company Web site.
"And growing numbers of cable companies will link them to Com21." |
