C-COM Satellite Systems Inc. (CMI-TSXV)

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August 20, 2010 Issue

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C-COM Satellite Systems Inc. Is Well Positioned With 25 Consecutive Profitable Quarters In A Growing Sector – Providing Mobile Two-Way Satellite Communication Systems, Designed For Easy Deployment In Remote Locations

Company Profile:

C-COM Satellite Systems Inc. is a leader in the development and deployment of commercial grade mobile satellite-based technology for the delivery of two-way high-speed Internet, VoIP and Video services into vehicles. C-COM has developed a unique proprietary Mobile auto-deploying iNetVu(R) antenna that allows the delivery of high-speed satellite based Internet services into vehicles while stationary virtually anywhere where one can drive. The iNetVu(R) Mobile antenna has also been adapted to be deployable from transportable platforms. The company's satellite-based products and services deliver high-quality, cost-effective solutions for both fixed and mobile applications throughout the world.






Leslie Klein is the co- founder, President and CEO of C-COM Satellite Systems Inc.

C-COM Satellite Systems Inc. was founded in 1997 with the intent of designing and developing a system capable of delivering high speed Internet over satellite into vehicles and transportable structures. With the rapidly growing demand for Internet services world wide and with no technology available to make it transportable C-COM designed, developed manufactures and sells its proprietary iNetVu Mobile Satellite Antenna Systems which make it possible to deliver high speed Internet services, voice over IP and video over satellite into locations where no terrestrial infrastructure exists.
 

Leslie Klein is an Electrical (Professional) Engineer with MBA and Ph.D. degrees.

 

Dr. Klein was employed by such notable corporations as Hewlett Packard (NYSE: HPQ), IBM (NYSE: IBM), Control Data Corporation, and Bell Northern Research (now part of Nortel Networks). He has been involved in the high-technology business over the past 35 years and has been a founder of a number of successful computer companies.

 
In 2000, C-COM went public on the Toronto Venture Exchange (TSXV: CMI) and raised additional funding, which allowed the company to finish the development of its satellite based iNetVu Mobile Antenna Systems. In parallel, Hughes Network Systems, Inc. (HNS), now called HughesNet announced one of the first satellite based high-speed two-way Internet connection services in North America, oriented towards the consumer and small business sector. In the same year C-COM has become a Value Added reseller of HNS and has launched the first HNS based two-way high speed Internet service in Canada which it continues to operate to this day. C-COM has adapted the iNetVu mobile to work seamlessly with the HNS hardware and is being sold world wide to many HNS satellite service providers.

 

In May of 2003 the first iNetVu Mobile Systems started shipping worldwide. Five years later the same systems are now sold worldwide to many satellite operators, their resellers, government agencies, emergency and police forces, the military as well as oil, gas and exploration companies. The iNetVu Mobile Antenna Systems support virtually all type of satellite modems available today. C-COM has very good working relationships with the majority of satellite service providers around the world who are reselling iNetVu Mobile Systems to their customers.

 

C-COM is  continuing to develop new and improved mobile solution that allow high-speed two-way satellite based Internet, voice over IP and video delivery into vehicles practically anywhere in the world using virtually any provider’s modems and services.

 

Today, C-COM has close to 1000 fixed subscribers generating recurring revenues covering North and Central America and over 2700 mobile iNetVu systems deployed worldwide.


Technology
Satellite Systems
(CMI-TSXV)


C-COM Satellite Systems Inc.
2574 Sheffield Road
Ottawa ON Canada K1B 3V7
Phone: 613-745-4110

 

Interview conducted by: Lynn Fosse, Senior Editor, CEOCFOinterviews.com, Published - August 20, 2010


CEOCFO: Mr. Klein, it has been about a year since we spoke, would you please bring us up to date on the major changes at C-COM?

Mr. Klein: C-COM Satellite Systems has certainly progressed in the year since we spoke. We have opened up some new markets mainly in the Asia- Pacific regions, Pakistan, India, Indonesia, the Philippines, and Australia. We also developed new products that are of great interest around the world for mobile satellite communications, so I would say these would be the most important developments over the year since we spoke.

 

CEOCFO: Tell us about the newer products, what do they do and who is using them?

Mr. Klein: Our newer products are the Flyaway products. These are light and portable satellite antenna systems that are designed to be transported for rapid deployment rather than installed on the roof of vehicles like our other models we manufacture.

 

They are used by oil and gas producers as well as oil and gas service companies, disaster management companies, military, police, and fire just mention a few. The advantage that these units have is that they can be assembled in ten minutes without any tools and they can be easily carried in the back of a vehicle and deployed instantly in just about any part of the world without knowing much about how to use satellite antenna systems or knowing much about satellite communications.

 

The antennas can then find the satellite at the press of a button, in under two minutes and the operation will deliver voice, video and data to a customer located just about anywhere in the world.

 

CEOCFO: Is this a new area in general or a new product area for C-COM?

Mr. Klein: It is a new area for us because we have not had these products before. They give our reseller another product to sell into the same existing vertical markets they are already selling into, but at the same time, they open up new vertical markets for them as well.

 

Mobile communications is a very fast-growing market and these antennas are capable of delivering great amount of bandwidth, which most of our customers require when operating from remote areas. Some of these vertical markets would be satellite newsgathering organizations, such as television and radio stations, news reporters, and government agencies requiring instant communications during a disaster. They may want to be able to set up and operate within minutes upon arriving in these remote locations where they need to communicate from.

 

CEOCFO: What is the competitive landscape?

Mr. Klein: There are competitors in this market place. The competitors tend to have much more expensive products and their technology is less advanced. They have evolved slowly and have not adapted to new technologies and most of them have not changed the designs of their products.  In addition, they have kept their prices very high, so as a result of this our products tend to be significantly less expensive, significantly more advanced, much more reliable and much easier to use.
 

CEOCFO: What technology have you been able to develop that allows this to be done?

Mr. Klein: The heart of the system is in the satellite antenna controller that operates the antenna. The antenna is really a robotic platform that moves in three dimensions, in azimuth, elevation and polarization. It does all these things automatically and without the need of a knowledgeable satellite operator who would take two hours with a substantial satellite knowledge and some very expensive tools to accomplish, what our system can do with a simple press of a button. Once the button is pressed, the antenna actually does all the things that a human being would need to do to align it to a satellite that is 36,000 kilometers in geosynchronous orbit above the equator  and it ascertains that it is pointing at the precise location where the satellite is located. It is not a trivial task as you can imagine and there is a lot of math, science and engineering as well as software involved to make this happen. The system is designed for people who need to be able to communicate rapidly from a remote location and to be used by people who do not know anything about satellites, much the same way millions of people who use the Internet have no idea how it works nor do they care.


They just want to get on line and use the Internet, Voice or Video for their applications regardless of where they may find themselves.

 

CEOCFO: Do people know this exists, or do you have to let people know?

Mr. Klein: It is a little bit of both. We have over the last thirteen years that the company has been in business, certainly educated a lot of people, but it is not uncommon for many of them to find it shocking that the technology is available, how easy it is to use and what the benefits of it are.

 

So yes, there are some people in the satellite communication business who know that this type of technology is available, but many end users, government agencies, police, fire, military and many others who end up being the users of this technology don’t know this exists.

 

There is an education process that we have to go through to introduce this technology. Since we work through resellers, we rely on the resellers to demonstrate this product and actually convince people it has benefits and it is a worthwhile technology to invest in.

 

CEOCFO: Would you give us an idea of a typical order; are people typically buying a number of units?

Mr. Klein: A typical single unit order will be anywhere from $10,000 up to maybe $40,000. That would be for a very large size antenna typically used by the military. Some orders are for a single unit or it could be for 100 units. We get repeat orders for up to 100 units and into the multiple millions of dollars from organizations that have bought the product before and they are expanding and need more. We also get orders for two or three units initially and then maybe for five or six, followed by ten, twenty or more. Most of the orders are multiple unit orders because people will buy one to test and verify their usefulness before they buy more units.

 

For example, one of our biggest customers is Halliburton. They use it for oil and gas exploration around the world and Halliburton has deployed over 200 units and they keep buying from us on a regular basis.

 

CEOCFO: What about your recent $2.3 million dollar order from Asia?

Mr. Klein: This was one of the largest orders we have received from Asia, and it is from the same customer who bought from us last year about $1.2 million worth of product an. This is close to double of the order from last year, which is an indication that he is very happy with what he bought is buying more from us.

 

We are very happy to see that this type of technology is finally getting a strong foothold in the developing countries of Asia, where it is providing extremely useful for communications.

 

One of our antennas used by a Pakistani TV station in Islamabad was recently deployed to cover the air crash. The crash that occurred just outside of Islamabad was at a location that was hard to access and our antennas managed to be transported there on top of Satellite News Gathering Vehicles and within minutes of the arrival there they were able to transmit live videos from this remote crash site around the world.

 

It was gratifying to see, despite this unfortunate accident, our technology at work in such a remote part of the world working flawlessly.

 

CEOCFO: Are there geographic areas that you haven’t penetrated that you would like to work in?

Mr. Klein: We are probably on every continent in the world now; of course, South America and Africa, because they are relatively less developed than North America as well as more developed countries like Russia and China, are markets that we are pursuing.

 

It takes a little bit more work to get into those markets than other markets where technology is more rapidly absorbed and deployed. We are also active in countries like Mongolia and Afghanistan where we are working with a number of resellers. In other parts of the world  like Indonesia, the Philippines and Malaysia, where our technology is already in place, were developing new vertical markets and signing up new resellers. We expect the market potential for all of these countries to be much greater than what it is today. It takes time, but we are hitting the ground hard and we are pushing very hard in all these markets to establish a presence. We want to be one of the first to be there with this technology to establish our name with a product presence and credibility for our technology. Therefore, many people who will come after the initial pioneers to buy the product will automatically select it like people who buy the BMWs or Mercedeses.’

 

CEOCFO: You have had a profitable quarter; what is the financial picture like today, and how has the current economic situation affected C-COM?
Mr. Klein: Because we operate across many areas of the world, we tend to not to be typically affected by one particular economic slump or another.

 

Even though in North America things have been relatively quiet for us, 90% of our business is outside of North America and it is booming in places like China, India, and Pakistan.

 

 Brazil for example, seem to have no recessions going on and if they have some sort of hiccup, the government agencies and the military and others who require technology to communicate are immune to those type of dips. In addition, since we are not selling $100 million or $200 million products, we tend to manage to sell our products, which are reasonably priced, to business and government agencies that need to communicate even during times of recession.
 

CEOCFO: Is this your 25th consecutive profitable quarter?
Mr. Klein: Yes it is. We have been profitable for 25 consecutive quarters, the company is debt-free, it has a very good cash position and we do not borrow. Our sales have been steadily growing and so has our profitability, which is good to see.

 

CEOCFO: What, if any, challenges do you see going forward?

Mr. Klein: We are constantly looking for new technologies to make our product even better, easier to use, and lighter. We are constantly experimenting with new technologies that may or may not yet commercially exist, to see how we can apply it to the technology we have in order to stay in the forefront of this technology.

 

It is a hard thing to anticipate which way the markets are going to go and which way the technology is going to go. We have to be very nimble to be able to follow the trends and the demands of customers around the world, which is not a very easy thing to do.


Many government agencies are imposing restrictions on transmissions, and reception type of equipment that you can bring into the country. We have to make sure we comply with all of these regulations so they do not slow us down. Until now we have been able to manage this process well and we will continue to sell more and more of our products around the world.

 

CEOCFO: Why should potential investors pay attention to C-COM Satellite Systems?

Mr. Klein: If they look at our financials, they will see that the stock is severely undervalued. We have pretty close to cash value if you multiply the number of shares outstanding with the price of the stock.


In my opinion, the stock is a bargain. We hope it will go up, as it has been treading water, sitting in the .28 to 30 cent range on and off for a while.

 

In addition, we hope that with these types of results that we just announced, of the contract that we are getting, people will get on the ground floor, and will hopefully realize that they will be able to benefit from a higher share price.

 

CEOCFO: Final thoughts, what should people remember most when they read about C-COM?

Mr. Klein: They should remember that we are a pioneering, innovative company with a technology that is very unique and we are providing life-saving communication capabilities to many people around the world in situations such as disasters, military, police and fire. The C-COM iNetVu® technology is probably one of the best available today in the world and one of the easiest to use. Potential investors should also remember that this is a unique product in many ways and the company and the stock has in my opinion a good upside with what we are doing here.

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We have been profitable for 25 consecutive quarters, the company is debt-free, it has a very good cash position and we do not borrow. Our sales have been steadily growing and so has our profitability, which is good to see. - Leslie Klein

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