When the telecom industry rebounds, will Telect Inc.which before the industrys collapse was hiring so feverishly that it couldnt find enough workers here to meet soaring production needsresume its role as an employment juggernaut?


Not likely, says Wayne Williams, its president and CEO.


The industry has changed, and so has Telect, says Williams, who led the Liberty Lake-based company through both its most frenzied growth and the painful decline that followed.


During the run-up, which had been fueled by an explosion in demand for wireless phones and Internet connections, Telect grew to employ nearly 2,300 people, more than half of whom worked at its then expanding complex at Liberty Lake. Sales in 2000 hit $265 million, more than double what they were two years earlier. The pipeline was full, and Telect and others were scrambling to fill ordersat healthy margins.


Today, Telect employs about 560 people worldwide, about 270 of whom are in Liberty Lake. Sales this year are expected to come in around $70 million.


In this post dot-com era, there are far fewer customers for Telects wiring and connectivity products, and those that are left are more thrifty buyers, says Williams. Margins are tight. Global competition is keen. The forces that drive companies to cut costs at home and rely on manufacturing abroad are intensified.


What that means for Telect is that when the company grows againwhich Williams says most definitely will happenit will manage that growth differently. Though the company remains committed to the Spokane area, its headquarters here will focus more on developing, engineering, and testing new products, and less on manufacturing. And that likely means less manufacturing employment growth here, he says.


There wont be another run-up in employment here, he says.


Though the Liberty Lake complex will continue to manufacture goods for the U.S. market, Telect will consider using contract manufacturersincluding in Spokaneto do more of that work. So as domestic orders begin to grow again at Telect, some of the workers needed to fill those orders might be hired by companies other than Telect, Williams says. Telects low-cost plant in Guadalajara, Mexico also will continue to handle some U.S. production.


In the past, we always felt like we should be hiring a lot of people here, giving them experience at Telect, making them part of our family, he says. Economics wont allow that anymore, he says.


Telect already had adopted a more global approach to manufacturing, having opened plants in Mexico, Poland, and Brazil to make Telect products for international markets. It closed its plant in Sao Paulo, Brazil, after the telecom industry imploded, and downsized its other plants, as well as its customer-service operation in England. When the international telecom market returns, Mexico and Poland will play significant roles in Telects growth, Williams says.


With the prospect of Telect being a smaller operation in Liberty Lake, that also means its 198,000-square-foot office and manufacturing complex at Liberty Lake probably is larger than it needs. There likely also wont be a need for the 80,000-square-foot former Accra-Fab Inc. building that Telect founders Bill and Judi Williams bought through a separate company a few years back as a place for Telect eventually to expand.


Telect currently is using just 65 percent of the space in its own complex, and the Williamses are trying to sell the former Accra-Fab building.


Wayne Williams says Telect has considered trying to lease out some of its office space, and even made overtures to Buck Knives Inc. that it would have been willing to give up its entire complex for the Southern California knife maker, which is moving its operations to Post Falls and is building a new plant there.


This would have been a great place for them, and we could have moved to somewhere smaller, he says. But they had their minds made up that they were going to be in Idaho.


Williams argues that Washington states business climate would make it very difficult to bring manufacturing operations to this side of the border. You could give this building away and still couldnt bring people here, he says.


Slow recovery, strong will


As Telect dropped more than two-thirds of its work force and revenues, it was forced to focus internally on efficiencies. It now generates more revenue with fewer employees than it did before the big telecom expansion. It also now has sophisticated software in place that enables managers to react quickly to order trends, changing margins, and supply needs.


Williams says shrinking the company was a process he would have never wished to have happen, but is thankful for the lessons it provided. Telect is more efficient today as a result, he says, and its workers and executives have adopted the zeal of an underdog trying to survive.


Its amazing that we were able to take 65 to 70 percent of our revenue away and still survive, Williams says.


He warns that there still are efficiencies Telect could put in place, so there is no guarantee that the company wont have to cut more jobs in the future. Ive got pockets of costs (within Telect) as well as the economic environment that concern me, he says.


I explain to our employees that continued strengthening the bottom line and returning to profitability remains a focus, Williams says.


He says Telects employees, despite watching most of their co-workers being laid off and despite seeing reductions in their benefits, seem to have more intensity for how they do their jobs. Weve taken away a lot of benefits and incentives away from the employees, he says. Still, Im feeling vigor and excitement in our people that has blown away my human-resources people.


Though Telect now has a firm handle on expenses, what I have a hard time controlling is my revenue, Williams says. I can control everything but my customers buying habits.


The telecom industry, he says, is mired in debt, and the equity markets havent warmed back up to the industry. Those factors and continuing overcapacity in the industry are causing companies to be hesitant to make significant capital investments, which is where Telect usually gets its sales.


After a very slow January, sales picked up in the spring and have put Telect on track to equal last years revenues of $70 million, but the company had hoped for more by now. Williams says it could be two more years before the industry fully recovers.


Yet, he sees a potential near-term bright spot in demand from phone companies, which he says have lost broadband Internet market share to cable-TV concerns and separately have seen phone customers using cell phones to take the place of second phone lines.


The phone companies are finally saying, Were tired of seeing the cable people cleaning our clocks, Williams says.


As phone companies push DSL broadband to compete with cable modems, and the wireless phone market continues to blossom, Telect should benefit by providing some of the infrastructure needed to provide those services, he says.


That should help us, he says. Thats where were going to see our growth.


Telect serves a much smaller customer base today than it did at the height of the telecom boom. We probably had 400 to 500 customers back in 2000, he says. Today its less than 100.


That will continue, Williams says.


Youll see huge consolidation, not just in the telecom industry, but among the manufacturers that supply that industry, he says.


In terms of those manufacturers, I want to be one of the aggregators, he says. Well figure out a time to make some acquisitions. Its not possible right now, but our senior management team has a format for what we would look for.