Having cut its own path into the international marketplace during the past 12 years, Itron Inc. now plans to take its recent acquisitions along that route.


The Spokane Valley-based maker of utility-data equipment and software expects that the products its acquisitions have added will find lucrative markets abroad.


These are new products for us, and were going to open up new markets for them, says Steve Helmbrecht, Itrons vice president of international business. Overall, we feel that the international market can be an increasingly important part of our business.


In the past 18 months, Itron has acquired Silicon Energy, an Alameda, Calif.-based energy-management software maker; Regional Energy Research Inc., a San Diego-based energy consulting firm; eMobile Data Corp., a Richmond, B.C.-based utility work force-management software maker; and LineSoft Corp., a Spokane-based utility software and engineering company. In all, the four acquisitions were valued at about $132.8 million.


Those companies established strong customer bases domestically before becoming part of Itron, but they hadnt tapped markets abroad to a significant degree, Helmbrecht says.


Itron already has customers on every continent and operates sales and service offices in Amsterdam, in the Netherlands, and in Sydney, Australia. The company has garnered a dominant market share in some countries. For instance, it has 70 percent market penetration for certain products in Japan and currently has a contract to install its technologies in all of the utility meters in the Grand Caymans. Still, Itron says its overall international presence is at a very early penetration level.


International sales accounted for about 5 percent of Itrons overall revenues in 2002, and about 40 of the companys 1,400 employees work exclusively in the companys international business unit.


While the overseas market is seen as an area of great potential, it has been volatile in recent years. Sales in the companys international business unit fell 46 percent in 2002 to $13.6 million, down from $25.1 million the previous year, and also were below the $18 million the company logged in 2000.


The company attributes that disparity primarily to an $8.9 million sale made to a Japanese customer in 2001, with no comparably-sized order last year.


Also, the company restructured its European operations last year, closing offices in England and France and ceasing production of products sold only in those two countries in an effort to improve profitability. The company replaced those offices with its Amsterdam operation, but the restructuring hurt its sales in Europe in the short term. Itron expects, however, that the move will help it operate in the European market more efficiently and improve the long-term profitability of that operation, Helmbrecht says.


The world is changing, and we think that is going to lead to demand for better data, he says. Those are the right ingredients to help us see a positive future for international for Itron.


Ripe markets


The newly acquired productsall software and knowledge-basedare appropriate for every country in which the company currently does business, but it foresees some special opportunities in specific markets, Helmbrecht says.


For example, he says, communities in India currently are experiencing rapid growth in electricity demand, which is placing a lot of pressure on the countrys transmission infrastructure. Such an environment creates a promising market for Itrons transmission-and-distribution software product group, which is essentially the former LineSoft. That group helps utilities determine the most efficient ways to transmit power or add distribution lines.


In many European countries, the power markets are being deregulated, and energy companies are looking for ways to maintain competitiveness, Helmbrecht says. In such markets, Itron expects strong demand for the services and software it added through the acquisitions of Regional Energy Research and eMobile Data.


That Itron already had established inroads into those markets will help it in its effort to introduce new products abroad, Helmbrecht says.


In international business, he says, established relationships are crucial.


They take a long time to build, but theyre invaluable in the long term, he says. Its especially true with us in the utility industry, where theres very little turnover (internationally).


Itron also sees growth potential in the international market with its core group of automated meter readers. Those products include hand-held meter reading devices that utility workers use to gather meter data manually, and radio-based data-collection systems that allow such data to be gathered via radio signals so a worker doesnt have to go door to door.


Helmbrecht says much of the technology currently being used abroad involves the hand-held devices, and Itron expects that utilities in other countries will upgrade to more efficient radio-based data-collection systems.


Currently, the bulk of Itrons customers are power companies, but the Spokane company sees potential for more demand from water and gas utilities. On the international front, the company has seen a greater interest by water utilities, which has resulted in demand for more meter-reading devices in some countries. He says communities that hadnt metered water usage previously, such as some in Mexico and in the Caribbean, are starting to do so as water shortages are becoming more frequent.


In international business, one customer can be profoundly different from the next, Helmbrecht says. To deal with that, Itron must adapt its products in a host of ways. For instance, it makes its equipment and instructions compatible with a number of languages, including Greek, Arabic, Spanish, and French, as well as English. Also, equipment that employs radio technology has to be adapted to accommodate different radio frequencies for different countriesnations often designate frequencies for various uses, including for utility meter reading.


The frequency with which meters are readand the type of equipment needed to read themcan vary greatly, Helmbrecht says. In some parts of Australia, for instance, commercial power meter readings are recorded on an hourly basis to gauge user trends. In some communities in the Netherlands, however, residential meters are read just once a year.


Customization of equipmentbeyond putting displays and instructions in other languagesalso is common for Itron in the international marketplace. In Japan, for instance, its customary for meter-reading personnel to record data, create a bill, and present it in person to each customer.


To accommodate that tradition, Itron made a special meter reading device that transmits meter-reading information wirelessly from a hand-held unit to a small printer that hangs like a purse off a meter readers shoulder. With that, a bill is printed out, and the utility worker delivers it by hand to the customer.


Of course, Itron faces challenges in the international market that it doesnt face domesticallyor at least, not to the degree it faces them abroad. Helmbrecht says the company has met some hesitancy from foreign prospects due to uncertainties arising from the U.S.-Iraq war. The company isnt attributing any decline in sales to the war yet, but, Its a factor were going to have to take into account, he says.


Itron hired Helmbrecht late last year to head up its international operations. He earlier worked as chief financial officer at LineSoft and did a three-year stint in London with a software company.


At about the same time that Helmbrecht came aboard, Itron elected Thomas S. Foley, former Speaker of the House and U.S. ambassador to Japan, to its board of directors, citing Foleys knowledge of public policy and international business as key attributes.