>>I like INPH a lot... When it gets back above 22.00 it should really cook...<<
Jim if you have a few minutes and are interested here is an interview with the President and CEO of INPH. Kind of long but I found very interesting
Wall Street Corp Reporter Interviews
Mr. Gregory B. Kalush, President and
Chief Executive Officer of INTERPHASE
CORPORATION
Wall Street Corporate
Reporter
Tuesday, July 06, 1999
4:03PM
Jul 6, 1999 (Wall Street Corp Reporter) via NewsEdge Corporation -
"I started my career with IBM where I spent 17 years in various financial and operational management roles. In 1991, I became the chief financial officer for the southwestern area and moved to Dallas. I left IBM in 1993 to join DSC Communications. My strong background in the computer industry and telecommunications, and the convergence of these industries from a technology perspective made me a good fit for Interphase Corporation. I joined the company last year as chief financial officer.
"Throughout the course of the year, I became very involved in the company's overall operations including manufacturing, product development, sales and marketing, and little by little each of those organizations began reporting to me. As such, we began to reformat and restructure the future product direction for many of the product lines within the company. In March, the board of directors asked me to take over when the previous CEO and president had an opportunity outside the company."
Interphase Corporation
"Interphase Corporation was founded in 1974 and has been traded publicly on NASDAQ since 1984. The company was founded primarily as a custom engineering house aimed at developing high performance storage solutions for major computer system manufacturers. Over the years, the company expanded its product expertise to include local area network, or LAN, technologies. Through a strategic acquisition in 1996, we also acquired significant wide area networking, or WAN, products and technology.
"As you look at the portfolio of the company right now, it is made up of products that enable communications in three primary segments of the communications marketplace. The first major communication segment in which we deal is local area networking with technologies including ATM, FDDI, and Fast Ethernet technologies. Our LAN products enable server-to-server or switch-to-server connectivity in corporate enterprise backbones.
"Interphase is a recognized leader in the LAN market space and was recently listed as one of Network World Magazine's top 200 networking companies for the third consecutive year. The second major segment is SAN, or storage area networking, which has historically been dominated by SCSI technology. However, over the past year and a half, the market has become very excited about our Fibre Channel product line because of this particular technology's unique features that enable extremely high performance SAN environments.
"We have been developing Fibre Channel products since mid-1995 are one of the only, if not the only, Fibre Channel supplier that has strong roots in the local area network. This is significant because many of the features needed for storage area networks are the same as the features that are needed for local area networks, so we have an inherent and extremely strong product line in the Fibre Channel arena. The third primary communications segment in which the company participates is wide area networking. This technology allows a company to connect remote employees and branch offices into the corporate enterprise network.
"We announced our flagship ENTIA product line in October of '98, and were pleased to announce in January that this platform was adopted and implemented by IBM. The ENTIA product family provides full remote access, wide area networking and virtual private networking capability to NT servers.This is significant because it allows the functionality currently provided by companies like Cisco and Ascend in their low-end boxes to be performed on a board within any standard Windows NT server.
"The result is a much simpler, more cost effective, easier to manager solution to implement within the corporate enterprise network. Therefore, we view our marketplace as local area, storage area and wide area networking for corporate enterprises and embedded systems applications.
Providing vital links
"Simply put, Interphase provides the vital links required to connect computers to networks. Today, 75% of our revenue is derived from sales to OEMs. The reason that these companies, particularly major computer manufacturers, select Interphase is because they have realized we can produce it faster, much less expensively and with more features than they can secure anywhere else.
"As a result, we have become an extended development group for many of the companies to which we supply product. These major companies like the speed with which we can implement solutions and the potency of our technology. When our customers implement our products, they recognize that our products have very high performance and are much more feature rich than they could procure elsewhere."
Recent announcements
"We're very excited about some of the announcements we've made over the past couple of months. In particular, we've announced a number of new Fibre products. Last March we introduced the industry's first quad-port Fibre Channel adapter in conjunction with the CeBIT show in Germany. We partnered with Motorola to demonstrate how this product can be utilized as a solution in the growing market for telecommunication servers. We also announced our next-generation 64-bit PowerSAN Fibre Channel adapter family. This exciting product offers the industry's most scalable performance for high-end, enterprise class servers.
"At the same time, we released our FibreView Enterprise software utility that allows a network administrator to manage their SAN server I/O connections from anywhere in the world through use of the Internet. I would also like to talk about two announcements regarding our entry into the emerging Voice over IP marketplace. Voice over IP is a rapidly evolving technology which allows voice, fax and other traffic that has traditionally been carried over the public telephone network to be combined with other forms of data and transmitted over virtual private networks or the Internet at significantly reduced costs. From an equipment point of view, we announced QuesCom, a small subsidiary that is incorporated in Texas and located in France.
"QuesCom is developing Voice over IP gateway products that basically allow enterprise customers to take their voice traffic and combine it with data traffic over their Intranets. A second subsidiary that we recently announced is Zirca.com, a 'next gen' telco that takes advantage of Voice Over IP capabilities along with traditional public network capabilities to offer international long distance telephone service. We estimate the market for international long distance services to be $50 billion by the year 2000 so it is a huge marketplace and the innovators of this type of technology are generally going to be relatively small units trying to get a piece of that big apple. We saw this as an opportunity to grow our company and diversify it into a very lucrative business segment."
Sales and margins
"The first and most important thing that we have done to improve sales is that we have virtually doubled the size of our physical sales force. The reason we did that is because we have some very exciting products in high growth markets, particularly in the Fibre Channel arena, which is expected to grow 90 to 95% compounded over the next four years. The second area that we are very excited about is the wide area networking market where we have an absolutely screaming product family called ENTIA which enables remote access and virtual private networking applications. "In fact, only three days after it was introduced, ENTIA was awarded the 'Frost and Sullivan Market Engineering Product Innovation Award' for the best product innovation in the remote access arena. We have some great products that have among the highest performance in the industry and each of these products are very strong price performers so we are pretty excited that we are going to get our engine humming again very soon."
Good growth
"The company historically had experienced relatively good growth each year prior to last year, but I make no excuses for last year. It was a transitional year for the company as we saw our legacy product lines fall off in terms of volume, and that was most notably apparent with our FDDI product offerings. However, if you look deep enough, you will see that the emerging products that we have been developing are very exciting and the market adoption has been somewhat rapid. In fact, current revenue contribution and growth of our WAN and Fibre Channel products is growing in excess of 100% compounded. Unfortunately, this growth is tamped down in terms of total revenue growth because of the fall off in our legacy technology areas."
An exciting company
"We believe that we are going to experience substantial growth at Interphase over the next couple of years. That will be through a combination of alliances, our expanded sales force, and the new products that we are bringing to market targeted for key high growth markets including enterprise wide area networks, Fibre Channel storage networks and next generation telecommunications servers based on CompactPCI architectures. We have great technology in all of the product areas that we participate in and have an aggressive attitude about getting our story and messages out to the market."
Alliances
"Interphase is are already working with key manufacturers of telephony equipment in CompactPCI platforms to marry some of our wide area networking technology onto I/O boards to take advantage of some of the carrier technologies they are using today like ATM technology over T1 and T3 connections. I am not at liberty to talk in detail, unfortunately, but I will say that there is a high degree of customer interest in these platforms. We are also stepping up our involvement with alliances in other technology areas as well. For instance, in the Fibre Channel arena we recently joined the EMC-backed FibreAlliance and the Storage Networking Industry Association (SNIA) which are both concerned with the management of Fibre Channel SANs."
ATM technology
"ATM, or asynchronous transfer mode, today is a carrier class technology that most large telephony producers use to carry long distance traffic across the United States. In fact, it is a very efficient technology because it allows the bandwidth to be managed by the requirement of the signal going across the circuits. We have been developing ATM products at Interphase now for several years and were recently identified by Gartner Group as one of the leading worldwide suppliers of ATM adapters.
"Although adoption of ATM has not been as pervasive as we had expected in the local area network, we are pleased that several telephony providers are asking us to take our ATM technology and put it on a wide area network platform so that they can manage it more efficiently within the telecom or PSTN (public switch telephone networks). ATM technology is basically a way for the carriers to get much more efficient within their devices and they are asking us for help in implementing that technology."
Staff
"We recently strengthened the executive management of the company with the addition of Steve Kovac as chief financial officer. Steve comes to Interphase with many years of financial and operational experience, predominantly focused in the telecom industry. Steve is an excellent addition to our senior leadership team. The team at Interphase has been in this hot, fast moving technology marketplace for quite some time, so they are highly skilled and have worked as a team for a long time. In fact, over the years, we have managed to have extremely low turnover in the company as well a very strong expertise in the technical areas."
Acquisitions
"Interphase will strategically acquire companies that fit into the market spaces that we are most interested in and leverage or complement the products we have."
Cash and credit
"We are in a strong cash position, and in fact, it is the strongest that it has been in quite sometime. I believe that we have really done a great job of managing the receivables and margins of the company so overall the answer is that we are comfortable with our cash position. However, that doesn't mean that we would not look at a secondary offering if we wanted to get into a more serious acquisition."
Market potential
"In the local area network, the potential is absolutely huge in the $500 to 700 million range. Other guy produce the hundreds of billions of dollars of market position and we are a subset of that in that we do the interconnectivity devices that allow those products to talk to on another. If you are talking about a LAN market that has a market potential of $15 or 20 billion, we will be $500 to 700 million in terms of our potential in the marketplace that we go after.
"Fibre Channel is estimated by the year 2002 to be a $12 billion market and our portion of that market is about $550 million. Actually in that arena, it is a shoot out between Interphase and a very small number of small competitors that are participating in the market. The wide area networking and remote access market will be a $10 billion market by the year 2002 and once again, our market potential in that is about $600 million. As we expand into storage area networks and wide area networks with innovative remote access and virtual private networking products it significantly enlarges the size of the market that we are going after.
"We offer world class products in each of these market segments. In addition, we already have connected alliances and strong OEM relationships as well as independently awarded performance and feature awards. If I had to make a claim about what is keeping us from the kind of returns and price/earnings ratios that we should be achieving, the answer is simply that we have to get the Interphase story out to the market and investors."
Attracting potential investors
"We believe that Interphase today is an extremely good value, and we need to focus on getting our story out. Many investors don't know about Interphase, and this is because it is not always obvious that Interphase is supplying the interconnectivity that resides inside systems that are most often identified by the key manufacturer such as IBM or Hewlett-Packard. However, we have a strategy in place this year to try and change that because the Interphase name and story has not really gotten out and there are many people who don't know who we are. The company does, however, have a high book value relative to the stock price."
A global company
"We are a global company and have just reinforced our global position in the Pacific Rim. In addition, we have almost doubled our sales force and coverage in the European arena where we are in Scandinavia, the UK, France and soon Germany. We have a strong global presence, and actually have a much stronger presence than what you would expect for a company this size."
Management's stake
"Personally, I have strong options in the company and am very comfortable with the potential for greatness out of this company. We have very good products and are in absolutely key markets where computer and telephony technology is converging and that market space is absolutely exploding."
Most important decision
"At a company like Interphase, there are a lot of turns in the road that you have to watchful for every single day. Of utmost importance is that we have a process in place that evaluates every opportunity relative to other potential opportunities. That is because it is very easy to spread your resources thin when you are a company the size of Interphase. Fundamentally, the most important thing that I have done since arriving at the company is to make sure that every one in the company is aligned around the product and company priorities that we have established for the company in the coming years.
"We make marketplace decisions based upon our customer's desires and the revenue and profit potential of each market. As a team, we have been able to get team speed in making very fast decisions and that is important because this marketplace moves too fast to dribble the ball for too long. The second most important thing in a company this size is to make the right decisions about what not to do and what to stop doing. It is important to decide where you can optimize the development effort that you have made, and where to direct each development effort and do that very quickly.
"If there is anything that we would like to emphasize here in the last year though, it is that we have increased the focus of the company substantially, and have decided that the markets we're going to go after, and we are going to win. The most notable example of this is the IBM announcement that we made earlier this year; we feel very positive about the fact that we beat out quite a few substantial competitors to win that business."
Remember most
"This company has a very strong, aggressive attitude toward attacking and seizing markets and you are going to see a lot more from Interphase in the months and years to come." |
