Industry News

TMCNet:  Santa Barbara's Occam Networks expanding broadband technology: Tech firm optimistic despite economy

[January 06, 2009]

Santa Barbara's Occam Networks expanding broadband technology: Tech firm optimistic despite economy

(Ventura County Star (CA) Via Acquire Media NewsEdge) Jan. 6--Occam Networks, a Santa Barbara company that makes equipment that telecommunications companies use to bring telephone, television and Internet services into the home, has grown rapidly in recent years and hopes to continue to grow despite the economic downturn.

Of all the industries today, the ones providing connectivity and entertainment seem to be doing well. Even in a tough time, few people will give up their telephones or Internet.

That's not to say there aren't challenges for the company. Occam is still striving to become profitable after an acquisition that brought in new technology along with new expenses. The company also had to make changes to how it accounted for revenue that resulted in a large restatement last year.

But Chief Executive Bob Howard-Anderson said he is pleased with how the company has grown and sees a lot of potential for future growth.

"I'm excited about our opportunities and cautiously optimistic," he said.

Despite some slowdown, Occam is working in a growing market, said Sam Greenholtz, principal of Telecom Pragmatics, a consulting and market research company.

Occam works with smaller telephone companies that work in rural areas, taking advantage of federal funding to get fiber-optic cable to homes and creating a "nice niche position," said Mark Lutkowitz, principal of Telecom Pragmatics.

"Telecommunications is one of the safer sectors in a downturn," Lutkowitz said.

Though the niche is nice, many big manufacturers are struggling now, and it remains to be seen if the company can get back to profitability in this economy, he said.

Occam's biggest advantage comes from decisions made when the company started, Howard-Anderson said. In 2000, the goal was to pursue new technology in the industry -- Ethernet and Internet Protocol technologies.

At the company's headquarters, visitors can see both halves of the equation. In a glass-walled room, equipment used by the telecommunications companies, including the company's biggest seller, Broadband Loop Carriers, are stacked and assembled, lights flashing and cables streaming up into the ceiling. In a nearby demonstration room, a giant screen is covered with images from television shows and movies, showing the possibilities for using television that relies on IP.

Though it was seen as a gamble at the time, that is now the way the industry is headed, and Occam has the advantage of being ahead of competitors with more "legacy" technologies, Howard-Anderson said.

Occam also benefits from targeting small- to mid-sized companies. It was the right decision to break into the market, and now Occam has about 300 customers. Those companies are more agile than the big players in the current economy and the pain of the downturn is more spread out, he said.

Occam has often been recognized for its fast growth. Most recently, Deloitte's Technology Fast 500 ranked it as the ninth fastest growing company in the Los Angeles region.

Howard-Anderson said he sees future growth in streaming video and data services as companies build fiber-optic connections to the home.

In angling for that future, the company purchased the assets of Terawave Communications in 2007, which was developing technology in fiber-optic network connectivity.

Howard-Anderson said that purchase took Occam out of a profitable position, but it was a good growth opportunity. At the time, the company said it would take a year and a half to become profitable again and Howard-Anderson said they're headed in that direction, though he wouldn't nail down a particular quarter.

"In the long term, we're going to be profitable," he said.

Since inception, Occam has had cumulative net losses of about $127.7 million. Though profitable in 2006, it had losses in 2007.

But the gap is shrinking.

In the third quarter of this year, the company had a net loss of $659,000, compared with a loss of $4.9 million a year ago.

Occam's revenue has been growing, increasing 25 percent over past year for the first nine months of this year.

70 jobs added

Growth has translated into jobs. Occam added about 70 jobs in the past year.

The company has 80 to 90 employees in Santa Barbara, 60 to 70 in the Bay Area, about 10 in Camarillo and others scattered around in home offices.

Occam also is signing on bigger phone companies, such as FairPoint Communications Inc., which bought the Verizon land line operations in Maine, New Hampshire and Vermont and quickly became the country's eighth largest phone company.

FairPoint will use Occam equipment as it rebuilds its broadband infrastructure.

Securing business with larger companies is not an easy task, Greenholtz said. The company will have to take on competitors that won't be knocked out easily, he said.

"Occam's got a rough road ahead," Lutkowitz said.

He suggests that the best option for Occam is to be bought by another company.

Market 'in its infancy'

Howard-Anderson said Occam is not considering a sale.

"We stay completely focused on driving our business," he said. Occam has significant opportunities, he said.

"We're still just scratching at the surface of broadband," he said.

So far, speed and reach of broadband has been limited, but it will only continue to push for higher speeds and better service. With new technology will come different ways to watch television, use the phone or video conference, he said.

"This whole video market is really in its infancy," Greenholtz said. "It's beginning to grow and expand out."

Occam is looking beyond the U.S. and Canada to Europe and the Pacific Rim, Howard-Anderson said.

"We're continuing to innovate," he said. "We got where we are by some clever innovations at the beginning."

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