Concurrent Computer Corporation (CCUR)
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leverages nearly four decades of technology, serving a diverse global customer base in the
cable, telecommunications, government, military, aerospace and industrial market sectors
with its world-class software, hardware, integration and service expertise for complex
A native of Michigan, Mr. Norton received his
Bachelors of Arts degree from Michigan State University in 1983 and is licensed as a CPA
in both Georgia and Michigan.
CEOCFOinterviews: Mr. Norton, will you tell us about your background with Concurrent and how it has developed since you have been with the company?
Mr. Norton: I came to Concurrent in October of 1999, just as video-on-demand was starting to take off. Since 1999, the VOD industry has grown and changed in the last five years. We have grown the company from two investor analysts following us to approximately twelve, and there have been significant changes in the industry.
CEOCFOinterviews: What is Concurrent doing today?
Mr. Norton: Concurrent currently has two business focuses. Our legacy business is in the real-time computing industry. We have been around for nearly 40 years and have been a public company for 15 years plus. The legacy of this business is that we sell software and hardware computer solutions to companies like Lockheed Martin Corporation (NYSE: LMT), Boeing (NYSE: BA), NASA, General Motors (NYSE: GM) and General Electric (NYSE: GE). They use our solution to do very real-time, highly deterministic computing such as air traffic controlling and rocket launch scheduling. For example, they use our systems on Aegis ships in the Atlantic to detect incoming threats and to provide immediate responses to the operator of the ship to make a critical determination of the threat level. The video-on-demand business actually spun out of the real-time computing business in the 1995-96 time frame. The first sale of our video-on-demand solution was in 1999 to the Oceanic Cable division of Time Warner Cable (a division of Time Warner TWX: NYSE). Since then, we have grown from one market to eighty-nine markets of video-on-demand across the country. We also have international commercial trials and deployments, including recent wins with two of Koreas largest HFC cable service providers.
CEOCFOinterviews: How big a part of the business is the Legacy section?
Mr. Norton: About 45% of our business from a revenue standpoint is in the real-time computing solutions and the legacies business, and 55% or so is in the video-on-demand business.
CEOCFOinterviews: Do you see that changing?
Mr. Norton: I would expect that the video-on-demand business would continue to grow on a percentage basis. The real-time computing solutions business has been leveling out, and we hope to see a little more growth or modest growth; the large growth is expected to come from the video-on-demand side of the business.
CEOCFOinterviews: What are you providing with video-on-demand?
Mr. Norton: We provide the server and software solution to a cable operator, which allows them to stream video from their cable plant to a persons set-top box in the home. Our solution enables that person to interact with their set-top box and interact with various content, so they can watch movies and other programming on a demand basis pausing, rewinding or fast-forwarding them at their control. This also works with other types of content, whether it is free-on-demand programming like Home and Garden TV or the do-it-yourself network or subscription video-on-demand like an HBO series. As long as the content is made available by the cable operator at the cable plant, we can make that content available on-demand and stream from the plant to the customers home. We provide a well-rounded solution. We sell the hardware and software, but it is our unique software solutions that provide the value to the cable operator.
CEOCFOinterviews: Will you tell us about the industry?
Mr. Norton: Our technology serves several different markets in video-on-demand. The primary market over the past several years has been the HFC cable market in North America. More recently, we have been successful at entering the international market largely in the Far East, Japan and Korea, as well as in Europe. We recently announced a partnership with Alcatel (Paris: CGEP: PA and NYSE: ALA) that has by far the largest market share in the DSL (Digital Subscriber Line) business. We announced a partnership with them to bring our VOD leadership and experience to the telephone industry and enable telephone companies, or telcos, to offer video-on-demand as a part of their triple-play service (voice, video and high-speed data) in order to combat their biggest competitors, which would be the satellite and cable companies.
CEOCFOinterviews: Are they licensing your software?
Mr. Norton: They buy the solution, but it is a permanent licensing fee to the actual software. They actually have a maintenance agreement where they would ask us to provide services to maintain the equipment and software.
CEOCFOinterviews: Do you do any customization?
Mr. Norton: There is a great deal of customization, which is largely the result of having to integrate with a number of different pieces of equipment. Every market is different; even Comcast Cable has sixty different cable markets. Each market has something unique about it, so we have to integrate our solution, and that might mean with a Harmonic edge device or Scientific-Atlanta Inc. (NYSE: SFA) or Motorola Inc. (NYSE: MOT) set-top box. There are a variety of different platforms, middleware and billing systems, and it requires a fair amount of work and expertise on our side to integrate all the different pieces in each individual market. Concurrents platform is based on open standards to allow for seamless integration with leading industry technologies
CEOCFOinterviews: Is there much competition for what you do?
Mr. Norton: We have two major competitors in the video-on-demand space. Theres SeaChange International (SEAC); they are a publicly held company on the Nasdaq, and there is nCUBE Corporation, with a much smaller market share.
CEOCFOinterviews: Why are people coming to you?
Mr. Norton: Customers are coming to us for a variety of reasons. Concurrent has extensive VOD deployment experience. Also, there are many unique requirements in each market, and we have a lot of expertise integrating with those different devices and software capabilities. We also have a unique architecture that we believe is leapfrogging our competition; it allows us to separate streams, storage and content ingest, giving operators the ability to independently scale streams and storage based on their customers needs. No one else does that. For example, a cable operator might want to add a significant amount of storage to their system so they can add more content. Initially when we were shipping our system, we were shipping systems that would support four to eight hundred hours of content. Today, our cable operator customers are asking for as much as ten thousand hours of content capability. A customer might want to add more content storage capability without adding streams; we can do that easily with our modular platform. On the other hand, they might have a significant amount of storage but they need additional streaming capacity, so we can ship them additional equipment and software, which allows them to provide a significant number of more streams without having to add the storage. This gives them the advantage of growing their system in a modular fashion as their needs grow. In addition, one of the unique things we can do is enable the cable operator to broadcast live television and as they are broadcasting live, they can digitally encode the content and make it available on-demand to consumers virtually immediately. For example, you could broadcast the Super Bowl live and after a great play, pause your television, rewind it to watch the play all over even though it is a live broadcast. There are various copyright issues associated with that, but it is being offered in various forms by cable operators today. Another thing that differentiates us is that we just came out with a new product that integrates with TV Guides interactive program guide, and it allows the cable operator to play automatically scaled streams of video within layers of the program guide, and that is something difficult for our competitors, if not impossible. We believe this technology will help cable operators better market the product to the customer, which will ultimately drive their sales, in turn driving a need for adding more stream, storage and content capability.
CEOCFOinterviews: What are you doing in research and development?
Mr. Norton: The majority of our costs are in the research and development area. Most of our employees are in the software development area. We have a significant software and development area in both our Integrated Solutions Division as well as our Video-On-Demand Division. They spend a significant portion of their time developing software for the customers demands for new features. We also have a more forward-looking development group that is out there looking at future generations of technology, both software and hardware. It is the largest component of our operating expenses.
CEOCFOinterviews: How do you market your services?
Mr. Norton: In the cable industry, you have a limited number of actual customers. One of the ways we market ourselves is that we attend a variety of different trade shows. We attend the National Cable Telecommunications Association (NCTA) trade show, which will be in San Francisco next year. We also attend the Society of Cable Telecommunications Engineers show. Those shows are attended significantly by the cable operators; both their marketing groups as well as their technology groups. We also have a direct sales group that focuses on the cable operators. We go after the cable operators at the corporate level initially and then they help direct us to the locations where they are planning on offering video-on-demand in the future. It starts out at the corporate offices of the cable companies and then moves to the divisional level. It is different with regards to the telco industry. One of the ways we are going after the telco provider is through our relationship with Alcatel and it is the reason we partnered with Alcatel because of their vast capabilities and the number of personnel that they have tapping into the telephone company market around the world on a daily basis. We are largely working with Alcatel in that process and together are introducing video-on-demand as part of telco triple-play services.
CEOCFOinterviews: Are telephone companies market-by-market?
Mr. Norton: This is more focused on going into the large telephone company itself, in partnership with Alcatel. It is deployed on a market-by-market basis, but we are in talking to companies like France Telecom, Telecom Italia, Duetsche Telecom, and British Telecom. We are in talking to the corporate offices, and they are making determinations as to who a viable supplier is to that industry. They will typically go through a trial of that system first and once they determine that the technology is going to work, then they will deploy it on a market-by-market basis.
CEOCFOinterviews: Are the markets different internationally?
Mr. Norton: There
are some unique differences internationally. Domestically, most of the cable operators use
Scientific-Atlanta transmission equipment or they use Motorola transmission equipment.
Internationally, it is more of a best-of-breed or best-of-class choice. They will use a
Scientific-Atlanta piece of equipment and pieces of equipment from multiple providers. For
this reason, there are typically more integration services
CEOCFOinterviews: Will you tell us about the current financial position of the company?
Mr. Norton: We ended fiscal 2004, which ended in June of 2004, with revenues of approximately eighty million dollars. We ended the June quarter with about twenty eight million dollars in cash, and we have no debt.
CEOCFOinterviews: What do you see for the future?
Mr. Norton: We are going to actively pursue opportunities internationally, both with cable and telephone companies. We are also looking at ways to diversify our business through additional markets. We also intend to expand our offerings with additional software products from other companies either through partnerships or through possible mergers or acquisitions.
CEOCFOinterviews: Will you give us an idea of how you might expand?
Mr. Norton: There are a variety of different software applications. One of the things that our competition does that we have not focused on in the past is the ad insertion business. We have certain capabilities in advertising insertion today. If you watch broadcast television today, you get an advertisement inserted into your television viewing; with video streaming, they dont use broadcast advertisements. Operators could very easily target a specific advertisement to your household, since they know the address of your set-top box and it is an individual stream that is coming from the video streaming equipment to your set-top box. They can specifically see that you like Jaguar, so the system would give you a Jaguar advertisement. Then they can capture that and figure out if the advertisement was viewed. They also can offer an opportunity to respond interactively with the advertisement to see more information. We are also looking into asset management and streaming video over an IP network to the PC and not just to the cable box.
CEOCFOinterviews: Why should potential investors be interested and what should they realize that they might not see when they first look at the company?
Mr. Norton: Concurrent has a lot of proven experience. We have been in the video-on-demand business for almost ten years. We have eighty-nine deployments and an impressive record of integration experience. There is probably not any unique situation that we havent experienced at least once before. That type of experience comes in very handy when you are going through complicated technical deployments. Our partnership with Alcatel has to be viewed as a very significant benefit over our competition. Who can partner with a company of that size that has the arm span of Alcatel? They give us significant opportunity that I dont believe our competition is going to be able to match. In addition, we have a solid balance sheet and some very strong technology. I think the biggest differentiating factor between our competition from a technology standpoint is our ability to independently scale streams, storage and content ingest. If you talk to the cable operators and the technical people that understand that technology, they really do believe that Concurrents technology is superior to our competitors.
CEOCFOinterviews: What are the challenges to go ahead with the plan and continue to grow and how are you ready to meet the challenges?
Mr. Norton: The biggest challenge is the inability to control the spending of the cable companies and telephone companies. They have many unique factors that are playing into their decisions as to where to spend their money. If you think about Adelphia Communications Corporation (OTC: ADELQ) and Charter Communications (NASD: CHTR), that have had financial difficulties, one of which is going through bankruptcy process and one is in the process of being sold. The cable operators are trying to improve their cash position and cash flow; we can have the product and technology but if they are not willing to spend the money, it makes it difficult for us. That is why I pointed out the plan to diversify our market opportunities, go after the telephone companies, the cable operators, as well as additional industries that offer video streaming. For example, in the education sector, we provide opportunities for public education institutions to provide on-demand type content to their students, as well as being able to provide the student the ability to access other content.
CEOCFOinterviews: In closing, will you tell us a bit about the corporate environment of the office of CFO?
Mr. Norton: The
corporate environment for CFO has changed quite a bit. Of course, there is much focus on
integrity, morals, ethics and appropriate knowledge of accounting rules and following
those rules. Concurrent has what I would refer to as the highest possible standards in
that area. We are careful of how we do things. We have a high corporate governance rating
by ISS, which is probably one of the highest; the last I looked it was 84 or 87 or
something like that. I think there is a lot to be said in that. It makes the job easier as
a CFO knowing that all of my colleagues in the organization have the same high standards I
do. We have established disclosure committee meetings every time we issue a 10-Q or 10-K
or earnings release. We have a variety of meetings to make sure all factors are
considered, and there are more than one or two persons making decisions on what is
disclosed and what is not. It has required us to be more interactive with our outside
legal counsel. We have strong working relationships. It is not just calling when you have
a problem, it is calling on a day-to-day basis to make sure they understand what is going
on in the industry.
Customers are coming to us for a variety of reasons. Concurrent has extensive VOD deployment experience. Also, there are many unique requirements in each market, and we have a lot of expertise integrating with those different devices and software capabilities. We also have a unique architecture that we believe is leapfrogging our competition; it allows us to separate streams, storage and content ingest, giving operators the ability to independently scale streams and storage based on their customers needs. No one else does that. - Steven Norton
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