Here it is. Expanding markets, new products, lower costs to ILECS/CLECS. Guaranteed success.
NHC Communications
Thu, Sep. 14, 2000 13:07
By Maria Babbage, Canada-iNvest.com
Montreal-based NHC Communications Inc. (NHC), which designs and manufactures tele- and data
communications equipment, announced its end-of-the-year results Sept. 13 with a 204 per cent increase in
fourth quarter sales.
According to NHC, sales for the quarter were $8.6 million compared to the $2.8 million for the comparable
period last year. Overall, the company has reported their sales have increased 33 per cent from $11.7 last
year to $15.7 million this year.
NHC manufactures the Virtual Cross-Connection System (VCCS), a copper cross-connect switch used in
telecommunication systems which connects regular telephone service to enhanced, high-speed Internet
services through Digital Subscriber Lines (DSL).
Among its fourth-quarter highlights, the company counts a $26-million contract with a major U.S.-based
Competitive Local Exchange Carrier (CLEC) as a major success. In addition, UUNET Italia, a WorldCom
company, announced in July it would start trying out the switch for its DSL systems.
"Basically, we decided to re-engineer the company to go from an old product line to a product line that we
thought might be really more outgoing in terms of market penetration and certainly, the need to position the
company," says Sylvain Abitbol, NHC's Chief Executive Officer. "So we use our expertise and technology to
address a specific marketplace, which is what we call the DSL marketplace, which is basically fast Internet
access."
But to Chris Bonnet, an analyst at Groome Capital who researches the company with colleague Clarence
Rebeiro, comparing this quarter's increase in sales to last year is like comparing apples to oranges.
"That's meaningless because last year they were a different type of company," he says. "This year, they're
mainly focusing on one product line. A big part of that revenue is a completely different product from last
year."
He says NHC was making other types of telecom and datacom equipment last year, which can't be
compared to the product they offer now.
"Let's just say they weren't executing as well as they could in that product range (last year)," he says. "They
had some issues to resolve, a lot of negativity in the stock."
The company has a 52-week low of just 8 cents and a high of $22. It is currently trading in the $16 range.
NHC isn't the only one that's producing the switch. A "good and close competitor," according to Bonnet, is
U.S.-based Turnstone (TSTN), which offers a similar product called the Copper CrossConnect CX100.
"They have a little bit of a lead on NHC in terms of clients and rollout -- they've been around for a little
longer," he explains. "But that validates the technology and the space that NHC is getting into."
Abitbol says the company will aggressively compete with similar devices currently out on the market by
offering features which are unique to their own products.
"I mean, we have one of the smallest products in the market today," he says. "And physical space is really
of the essence, because the clients to whom we sell our product to rents space within a central office and
they are being charged, on a per square-foot basis, a very, very high price. So product has to also be very
very compact and dense.
"We also have a full line of products. Turnstone has only one model . . . we have four. Nobody else has
what we call a weather product, or a remote outside unit, which can be installed in outside locations . . . So
by having some models and some configurations that our competition does not have . . . (and) the whole
thing at a very good price, we believe we stand a good chance to become the leader in the market."
Bonnet agrees, noting that although NHC's cross-connect switch now includes a testing mechanism
featured in Turnstone's switch.
"They're trying to roll out as aggressively as possible," he says. "They're expanding the product line to
include features that they didn't have on the previous product.
"But the cross-connect switch that NHC has is more advanced that the cross-connect feature on
Turnstone's. So NHC says now, 'Okay, well, why don't we design a box that includes a testing feature and all
that stuff so we can compete directly with Turnstone in that type of product.' So they're expanding the
product line in terms of other products that complement the switch, as well as expanding the switch itself to
include more ports."
As for what's ahead with the company, Abitbol explains that with a newly "beefed up" marketing and
management team, NHC will be going after four different sectors of the market.
"Well, it's going to be getting more accounts and getting more business," he says. "We are going after what
we call the CLSCs market, which are the Competitive Local Exchange Carriers, almost private carriers. We
are going after the phone companies called the ILEC, Incumbent Local Exchange Carriers. We are going
also after the hotel business, where similar devices will be installed to provide the fast Internet access to
people who are booked in a hotel. And the fourth one is, we are looking at strategic partnerships with big
players."
For Bonnet, there is only one question in NHC's future.
"We think that NHC has probably a superior product to Turnstone's, and now it's just a question of getting
that product out on the market, a lot of marketing and getting a lot of the telecom service providers to take
notice."
Now that UUNET Italia has picked up NHC's switch for test use, he says the company looks like it's heading
in the right direction.
"Hopefully, if they like it, they'll begin to roll out into their central offices in Italy," he says. "Also, there's a
possibility of capturing some UUNET or WorldCom business in the States as well. Obviously, they're trying
to pursue that."
Additional links: www.nhc.com
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