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eLinear believes that securing networks, data and physical
premises are all at the forefront of peoples minds and the company has positioned itself
as a leading player in these and several other primary markets
Security, Communications & Compliance
2901 West Sam Houston Pkwy. N.
-Suite E. 300, Houston, TX 77043
President and CEO
Interview conducted by:
Lynn Fosse, Senior Editor
March 10, 2005
BIO: Michael Lewis
Chief Executive Officer /President
Mr. Lewis has served as President of eLinear since July 9, 2004 and CEO since December 22,
2004. Mr. Lewis has more than 19 years in the technology systems integration industry and
was formerly the President of LIBAC Corporation, a start-up software company targeted at
the financial printing industry. Prior to LIBAC, he was Chief Operating Officer for
UnBound Technologies, a wireless technology company which Mr. Lewis helped develop from
start-up through a business integration with Sprint PCS from December 2001 to August 2002.
He served as Senior Vice President and General Manager for Computer Tech, a
Houston-based integrator, from November 1996 to March 2002, where he led a team that
doubled revenues and tripled profits over that period of time. Prior to that
position, Mr. Lewis served as a General Manager for CompuCom Systems, Inc. from March 1991
through October 1996.
eLinear Inc. is a communications, security and compliance company providing integrated
technology solutions including information and physical security, IP telephony and network
and storage solutions infrastructure. Typically, the company's customers are Fortune 2000
and small to medium-sized business organizations. eLinear's services are offered to
companies seeking to increase productivity or reduce costs through investing in
technology. eLinear has a national and international footprint and has its headquarters in
Mr. Lewis, as the new CEO of eLinear, what are you going to do that is different?
Mr. Lewis: "eLinear is in an interesting place in the
industry, which is to say that in this key technology area, the whole voice and data
convergence is now largely accomplished. People are trying to get business benefits from
that convergence. We expect to be on the leading edge of that."
What do you need to do at eLinear to make that happen?
Mr. Lewis: "The first step is to chart a course. When we
look at what the market is offering and what our capabilities are vs. those opportunities,
we have done a good job of mapping to that. We have taken and built specific practices
within our company that we believe will take care of our shareholders and grow the
company. The first of those practices is security. We believe that security and compliance
related security technologies will lead corporate spending. Second is our IP practice,
which includes IP networks as well as Voice Over IP. The convergence of voice, data and
video networks has created a lot of opportunity. We are already viewed as a leading player
in our primary markets. Also, in our Core IT practice, we are doing a great number of
interesting things with core technologies around Microsoft Corporation (NASDAQ: MSFT), the
Sun product line and specifically storage. Our last practice is physical infrastructure,
which is focused on securing premises. We are doing a lot for things related to CCTV and
secure card access and those kinds of technology-based physical and security
Do your customers tend to use all of your services?
Mr. Lewis: "Our customers tend to use almost all of our
services. Voice over IP, for example, is an area that a lot of businesses are migrating
to; however not everyone has made that decision yet. All of the other practices that I
mentioned are being utilized across the line. When you consider our vertical markets, we
really have more horizontal offerings because almost every vertical you name, the
components of what we talked about so far, are represented."
Your core technology uses Microsoft; will you elaborate on that?
Mr. Lewis: "Microsoft is at an interesting place as they
are certainly a cash cow and possess a comprehensive line of products. However, they
have commoditized their most ubiquitous offerings leaving no margins in it for players
like eLinear. In order to resolve these problems, Microsoft has begun to work with its
integrators to try and create niche product offerings that will be more attractive to
players like us. Subsequently, this strategy will move them (MSFT) a little more toward
the front of the decision-making matrix. We are currently working with them to recognize
and exploit the niches that we see together."
What is your revenue model?
Mr. Lewis: "Our revenue model is actually based on a
couple of different segments. The actual practices themselves each have a little different
flavor. As the question relates to our physical infrastructure practice, over
the past several months we have successfully executed and integrated the acquisition of
TanSeco Systems Inc, which was a wholly owned subsidiary of RadioShack (NYSE: RSH), and
also which had a couple of interesting businesses. Tanseco came out of Radio Shacks
loss prevention group. As it (the acquisition) relates to the billing model itself,
revenues are both project and recurring in nature. On the project side, we are doing
the kiosk installations, store updates and maintenance services for Radio Shack across the
United States and the protectorates. We also bought a piece of Radio Shacks
monitoring business, which provides a monthly recurring revenue stream. Our situation with
TanSeco is unique, in that we have the project business, the ongoing technology
acquisition, which is kind of on a replenishment basis, and then we have actual service
contracts and monitoring agreements."
How do you compete and why are people choosing you?
Mr. Lewis: "We dont lack for competition. We have
a direct sales force which is contacting customers directly; this has become a successful
model for us and will be going forward. One of the benefits that our success has garnered
for us is a great deal of attention and attraction within the vendor community. Time and
again we have followed through with our promises and have become a tried and true vendor
partner. We understand how to connect and go to market with our vendor partners and it is
this relationship that will help drive our business to the next level. Our vendors give
us, if you will, first right of refusal. Additionally, our vendors provide us with
opportunities to make presentations that they have farmed out on our behalf. The bottom
line is that we are gaining a great amount of traction in working with our vendors."
Where are you focused geographically?
Mr. Lewis: "I would like to say that we are not
geographically focused. We are obviously exploiting the markets in our own backyard;
however we have a great deal of interest in other parts of the United States and across
the world. Earlier last year, we finished a ten-country rollout for a Voice Over IP
integration across Europe and Asia. We didnt actually go to China but we assisted in
the planning, design, and installation and thus had responsibility for the installation
there for the same rollout. We also have deals in the offing in Angola and Dubai and a
number of other countries in the Middle East. I dont think the bulk of our business
is going to be coming from those areas, but because we talked about horizontal solutions
and practice areas that span vertically, we tend to be invited into places that might not
be intuitive. The other thing is that Houston is the capital to many of Fortune-500
companies. Because of that, many of these large companies that are headquartered here in Houston
have continued to utilize our services to help foster their growth domestically and
acquisitions an ongoing part of your strategy?
Mr. Lewis: "They are. We intend to continue to acquire
companies for two primary purposes. One is finding and attracting talent. This is an
ongoing activity and you need to be doing all that you can to get the right and the best
people. Acquisitions are a method for doing that. The second piece, of course, is that we
intend to acquire the best of breed technologies out there. As we have moved up the food
chain, we will be at a place where we will be looking for opportunities to bring
intellectual property into the company and be able to offer that to our client base. It is
these types of opportunities that will help provide much help and will enhance both our
gross and net margins and it is these future opportunities that we will be looking to
Will you tell us about the financial position of the company?
Mr. Lewis: "eLinear has forecasted revenues $23.5 mm for
calendar 2004. This represents 73% growth over 2003 revenues of $13.6mm Furthermore, as
stated in a recent press release; we anticipate revenue of $32-36mm for 2005. We are very
excited about this growth and look forward to 2005 and beyond. Secondly, our successful
acquisition and integration of TanSeco in late November has already proven to be accretive
to our margin expansion. Thirdly our office in Dallas, which we brought on-board in May of
2004, is now beginning to contribute significantly to both our sustainable long-term
revenue stream but also to our bottom line."
How do you have to focus, as a company, to keep up with new technology?
Mr. Lewis: "The way we have organized our business into
practices has put us in a position that places the responsibility of keeping pace with
each technology on the practice manager. These experts must focus squarely on keeping pace
with their respective technologies and new developments within their practice areas. The
practices are not constituted in the way that you might normally think of in terms of a
big six kind of a practice. The embodiment of this practice is around the technology. The
engineering base, the sales team; these are managed by other folks. Each practice managers
responsibility is to make sure we are a best-of-breed solutions provider and world-class
in that practice. Furthermore, each manager must ensure that we are not only acquiring the
best technology, but employing that and integrating it with the other technologies in the
What would you like to say to potential investors and what should they know about eLinear
that is not visible at first glance?
Mr. Lewis: "I think that the potential investor should
be interested in eLinear because of our rapid momentum. This momentum reflects something
This market is not necessarily moving very fast but we are. When you
look at the movement across various metrics, when you look at the revenue growth and the
markets that we have gone into, and finally some of the decisions that we have made, we
are a strong pool of talented folks. I am proud of the company that we are building and I
think the results speak to the folks and the talent here. In terms of things that might
not be noticeable at first glance is the transition that we have made over the past year.
We are in the middle of developing into a true systems integrator and this is really where
a lot of value will be unleashed for our investors. Our stock right now is, in my view, at
an attractive point because that transition isnt yet complete. As we progress toward
executing our current strategy, I think we will see increased revenues and greater margin
expansion and the realization of profitability during the fourth quarter of 2005. All of
those things will come together and I believe will reward the investors who place
confidence in us at this point."
In closing, is reaching the investment community a focus for eLinear?
Mr. Lewis: "We are a publicly held company and we
undoubtedly understand how important it is to actively communicate our story with the
investment community. We expect to attract both institutional and retail investors through
our proactive investor relations campaign. We have a variety of different public events
and mechanisms by which we try to get the word out. From my seat, I think the thing we
have to do to build a great company is to understand that smart investors will be looking
for us as much as we are looking for them."
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