Its Christmastime! exclaims Telect Inc. CEO Wayne Williams as he approaches two workers who are unpacking boxes that contain yet-to-be-introduced gear aimed at a whole new market for the Liberty Lake-based telecommunications equipment maker.
Visibly excited, Williams inspects Telects new media gateway, an equipment rack that resembles from the outside a residential electrical circuit-breaker panel. Inside, though, this panel has everything a homeowner might need to route voice, data, audio, video, and security throughout the house, including TV-cable splitters, Ethernet routing and switching, a wireless access point, and its own battery backup.
Telect, which for all of its nearly 25 years in business has focused solely on serving telecom companies, now wants to take what it knows about sophisticated signal connectivity and cable management to the residential market, which Williams believes ultimately will drive what telecom companies do in the future. Consumers, he says, quickly are becoming high-demand users of bandwidth, and as their thirst for downloading music and videos expands from their computer to their entertainment center and mobile devices, telecom providers will have to respond with the pipelines and equipment to serve that demand. Telect, Williams says, wants to play a bigger role in that changing market.
Our focus now is to provide an end-to-end solution, all the way from the central telephone office to the television screen in your home, he says.
A self-described techno-geek, Williams speaks passionately about the new product line, which Telect will introduce at a trade show in Chicago next month and Williams will install, at about the same time, in a new home he is building.
Yet, the new line represents just one of the changes at Telect. Williams says the company has undergone a transformation, especially in the past year.
Companywide, employment is down sharply. Telect now employs 747 people worldwide, down from about 830 a year ago and 2,300 at its peak in 2000. In the past year, it has implemented lean-manufacturing strategies at its plants in Texas, Mexico, and Poland and now can achieve the same production level with fewer people, he says.
Williams says he also is ushering in a new culture that requires different skill sets and philosophies than some Telect employees had, and because of that, some workers have decided to leave, and others have been asked to leave.
Weve had good turnover in the last nine months, he says. Its not that we dont appreciate what some of those people did for Telect, but as a result weve been able to bring in some phenomenal people.
Telect no longer puts an emphasis on making all its products in-house, so it needs more people skilled in global procurement and shipping logistics as it outsources more of its production.
Its sales culture also has changed. Last year, Telect brought in Mike Peterson, who has worked for IBM, Cisco, and Eli Lily, as vice president of sales and marketing, and he and Williams have put in play new expectations of the companys sales team. While in the past salespeople in the telecom industry could get orders by simply keeping a good relationship with a growing customer base, today they must be more aggressive about finding customers, and work harder at solving customer problems, Williams says.
With that has come a new compensation structure that puts a greater emphasis on commission rather than salary, he says. Since the changes, Telect has seen a 90 percent turnover in its sales force.
Telect also is taking an approach to providing information to customers that Williams says is unorthodox among manufacturers of specialized equipment. That is, it is willing to share information instantly, online, that in the past was given sparingly, over the phone. For instance, such manufacturers traditionally might provide an overall quote for an order and an estimate of expected delivery, but now individual component prices are listed on the Internet, as well as when they will be delivered. Consumers are used to getting that information, but thats not necessarily true of buyers in the telecom-supply industry, he says.
If you know it and you can predict what the customers want, give everyone the data; dont hold it, and solve the problem. Then, be the fastest to the market in delivery and competitively priced, he says.
Telects revenue has been flat in the past year. The company ended 2006 with sales of about $80 million, about the same as in 2005, when sales shot up 19 percent, reminiscent of Telects rapid rise last decade. Like others in the high-tech industry, Telect grew markedly in the 1990s, hitting sales of $270 million in 2000, before the technology sector collapsed.
Im not daunted at all about flat, says Williams, adding that hes now more interested in investing in new technologies and new markets. Also, he says that by offering products across the market spectrum, he thinks hell be able to dampen seasonal swings and have a better feel for future demand.
It helps to know something about your customers customer, in this case the home market, Williams says. We didnt understand that well in the downturn of 2000. If you dont, you wont see a storm coming.
That previous storm hit Telect hard. Sales fell to about $60 million in the downturn.
Williams contends Telect is stronger now, and smarter. It no longer does manufacturing at its Liberty Lake headquarters, which now are housed in a 52,000-square-foot building the company previously added to expand its manufacturing operations here. It moved to the smaller building last year after selling its sprawling, brick-and-glass complex next door to Itron Inc., the big Spokane-area maker of automated meter reading technology.
Much of Telects manufacturing takes place at its plant in Plano, Texas, which it acquired in late 2004 through acquisition of Santa Barbara, Calif.-based Hendry Telephone Products, and at plants it has operated for years in Guadalajara, Mexico, and Wroclaw, Poland. It also contracts out manufacturing all over the world, including, still, in the Inland Northwest, Williams says.
Employment at Telects plant in Poland has remained stable in the past year, at about 96 workers, while the Mexico plants work force fell to 260, from 400 a year ago, due to the lean manufacturing changes. Meanwhile, employment at the Texas facility, in a Dallas suburb, grew to 242, from 191 a year ago, as Telect reorganized it to be the companys main distribution center for North America, Williams says.
That plant will continue to make Telects racks, cabinets, and related products, as well as some assembly and integration, but now also will serve as Telects North American distribution center.
Williams says the Dallas corridor is home to many of the companys biggest customers, and accounts for nearly 60 percent of its North American revenue stream.
Williams says sales of Telects new residential product line could end up being pretty significant in terms of revenue, considering that it could garner $100,000 in revenue from the sale of just 50 residential systems, which is the equivalent of a big sale to a telecom switching facility.
There are, after all, a lot more homes out there than there are switching facilities, he reasons, and as more homes install better infrastructure for using high bandwidth signals for entertainment and other purposes, the telecom companies will need to buy more gear for their facilities to meet that demand.
Currently, Telect expects to offer a standard residential package that includes a residential gateway panel equipped with everything a homeowner needs to supply eight rooms with voice, data, and video signals, as well as the wiring to run to the rooms, and the faceplates required in each room. The list price for that package will be about $1,100, not including installation, which Telect wont offer.
Williams believes, however, that a good number of homes will want more technology than that, and that a $2,500 system, including connectivity for audio and security systems, might be pretty common.
The panels have been designed to fit between 16-inch-on-center studs, which are common in home construction, and can be equipped to handle fiber-optic connections to a home, which are starting to appear in new housing developments. The components within will be color-coded, so that people without technical knowledge can easily make connection changes and do modest troubleshooting, Williams says.
When using an approved installer, Telect will certify the system for 1 gigabit signal distribution, and the company is considering setting up a support line that end users will be able to call for help, he says.
Telect plans to have the products available for sale in July. It hopes to persuade telecom companies to market the products themselves or through partnerships as another offering for their customers, and also plans to sell them to home builders, specialty home-wiring vendors, and directly to do-it-yourselfers, via the Internet.
The products likely wont be sold at big-box stores, but might be sold through specialty retailers, such as those that sell higher-end audio-visual equipment, Williams says.
Our focus will be to educate our current customers, he says. They will work with developers to move the product to the residential market. Williams adds, though, that Telect will advertise directly to builders and specialty vendors to market the product, including in the Spokane area.
Thats different, he says. In the history of the company, weve never rolled out a product in our own backyard.
Contact Paul Read at (509) 344-1262 or via e-mail at firstname.lastname@example.org.
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