Telect Inc., the big Liberty Lake maker of telecommunications equipment, is taking what company officials believe are the first steps in building a new foreign subsidiary that would produce and sell products for the companys growing customer bases in Europe, Africa, and the Middle East.


Last month, Telect opened a sales and customer-support office in Southampton, England, that is expected by the end of the year to employ nine people. Meanwhile, the company is negotiating with a contract manufacturer in Poland that would produce a Telect product thats targeted specifically at, and already is selling well in, the European market.


Those two moves, says Telect President and CEO Wayne Williams, are part of a company strategy to establish a stronger presence in the European market, which has been strengthening of late and now accounts for about half of Telects international sales. The moves could very well trigger the eventual creation of a self-contained Telect subsidiary there that makes at least some of the products it sells, which, in turn, could become a model for other possible foreign subsidiaries in China and South America, Williams says.


Our goal is to become borderless to our customers, he says.


Meanwhile, Telects manufacturing plant in Guadalajara, Mexico, which celebrated its first birthday late last month, already is at capacity and might be tripledor even quadrupledin size within the next six months, says Williams. The plant employs about 85 people now and likely will add another 20 workers by summer, even before the expected expansion.


All that doesnt mean Telects sprawling Spokane Valley operation wont continue to grow, he says. The company completed a $7.5 million, 120,000-square-foot expansion of its headquarters facility at Liberty Lake just last fall, and already is considering another expansion of the now 156,000-square-foot overall facility.


Williams says the manufacturing portion of the expanded facility already is at capacity, and Telect could decide to add even more manufacturing and/or warehouse space there. In either case, he says the company very likely will add more office space there, to accommodate more product-development and customer-support positions at Liberty Lake. Telect also still has some room to grow in space it leases at the Spokane Business & Industrial Park.


Telects domestic sales continue to grow and still make up 85 percent of its overall revenues. We dont see jobs here going away, Williams said in a recent interview here. Telect currently employs about 975 people, all but about 90 of whom are based here. Its sales last year grew roughly 30 percent to just under $100 million, and are expected to grow another 25 percent in 1998, he says.


Telect, Williams says, will create overseas operations only in cases in which it makes sense to manufacture a product in the region in which it will be sold. He says many foreign buyers these days require their vendors to guarantee that at least a certain percentage of the products they buy will be produced or assembled in their country. Also, shipping and tariff costs associated with exporting U.S. products can add greatly to the cost of products, often putting U.S.-based manufacturing operations at a big disadvantage in the international market.


To be competitive in world markets, Telect will have to find ways to have at least portions of its products produced in those buyers countries, he says. Cheaper labor, the factor many people think of first when talking about establishing U.S. manufacturing operations overseas, can pale in comparison to these other costly considerations, Williams contends.A European baseTelects new offices in England will be headed by the companys regional manager for Europe, Africa, and the Middle East. That manager, Carl Scott, had been working out of his home in England, and already was overseeing two other Telect employees, one of whom covers Western Europe and the other who covers Eastern Europe.


Telect recently hired a technical-service representative and a customer-service representative for the new European operation, giving it five employees there, and expects to hire another four people there in coming months, says Tim Szymanowski, Telects Spokane-based vice president for sales.


We know its not viable in the long run to run our European sales from Liberty Lake, says Szymanowski.


The Polish manufacturer that Telect might hire to build one of its products recently completed a prototype copy of the product, which currently is manufactured here and is called the SuperMix. The manufacturer could start regular production in Poland in the next month or two. Williams says many of the components for that product would continue to be made in Spokane and shipped to Poland for incorporation in the device. He adds that Telect will pursue other such contract-manufacturing relationships there and also might establish its own manufacturing facilities in Europe.


Szymanowski says Telects name recognition has been spreading rapidly in international markets, partly because of the alliances it has established with big international telecommunications companies that sell Telects products both under Telects name and under their own brand names.


He says that when Telect participated in a big international electronics show in Hanover, Germany, last month people from at least 20 different European and Middle Eastern countries visited its booth, and they knew us without us knowing them.


Williams says Telect is now selling its products in dozens of countries, including Hungary, Romania, Ireland, Poland, Italy, Israel, and Russia, some of which are served through partnerships with other companies. Our partnerships are working very well, he says.China next?Telect has made inroads into China through the alliances it has built with large telecommunications companies that have been making big sales in that huge emerging market, including some that include involve Telect products.


Szymanowski says China represents a huge market for the telecommunications industry because so few of its people have telephones and because that country realizes that telecommunications is critical for its future economic strength.


Theyve taken a very aggressive network-build plan there, Szymanowski says. Its in the best interest of developing countries to get up to speed.


Telect, for now, considers China separately from the rest of Asia, because its market is so different from that of industrialized countries such as Japan.


Though its not clear when Telect would open an office in China and start moving toward developing a subsidiary operation there, it might be sooner rather than later. Long term to me is one or two years, says Williams, hinting at the speed at which the high-tech industry moves these days.


Well know more in the next 60 to 90 days, he says, adding that representatives from some of Telects partners will be in Spokane soon for strategy and update sessions.Latin AmericaIn addition to China, Telect is looking at Brazil as a location for another foreign operation, though efforts there have been slowed by economic woes. Though, like China, there is large potential for telecommunications development there, the economy is weak, and a big segment of its population, Japanese emigrants, have been hurt by the Asian economic crisis.


The Asian crisis hit Brazil hard, says Williams. We wanted a site there by the second quarter. Now we are re-evaluating how we are going to penetrate that market.


Currently, Latin American sales are headed by a Telect employee who works out of his home in Tulsa, Okla., and are primarily handled by a group of independent reps who live and work throughout Latin America. The Tulsa-based regional manager also oversees a sales rep who works out of Telects manufacturing plant in Guadalajara, Mexico, although the company views Mexico as a somewhat separate market from the rest of Latin America.


Williams says its important to have operations elsewhere in the world for many reasons, one of which is that foreign customers now are more relationship-driven than those in the U.S. Foreign customers want someone on their soil they can talk to and work with. In the U.S., he says, the top two sales factors for customers seem to have become delivery time and price, in that order. They have to have it fast and it has to be competitivethat comes before relationships, Williams says.


Eventually, he says, Telect will have country managers based in each country in which Telect does business.


Williams says that with the addition of foreign operations, Telect plans to extend service on its customer-service lines to 24 hours a day, by automatically switching calls among its global operations to take advantage of time-zone changes. At night in the U.S., for instance, a customer here might call Liberty Lake and have the call answered by someone in England with a British accent. He says the company could begin that process later this year.


Telect was founded in 1982 by Williams parents, Bill Williams Jr. and Judi Williams, who are chairman and executive vice president, respectively. The company produces a wide range of communications cables, connectors, and switching equipment for analog, digital, and fiber-optic applications.