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ISCO
International provides plug and play compatible RF products that enable
operators to combine disparate technologies within legacy cell sites,
minimizing the number of new sites or additional antennas and significantly
improving the overall performance of the network
Telecommunications
Wireless Processing Solutions
(ISO-AMEX)
ISCO International Inc.
1001 Cambridge Drive
Elk Grove Village, IL 60007
Phone: 847-391-9400
John Thode
President and CEO
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
March 10, 2005
BIO:
John S. Thode
President and Chief Executive Officer
Thode, 47, a 25-year Motorola executive, most recently served as Vice
President & General Manager, 3G Consumer Products, Personal Communications
Sector, where he created Motorola’s UMTS product lines. Before that, he was
Senior Director & General Manager, Wireless Access Systems Division.
Company Profile:
Founded in 1989, ISCO designs, manufactures and distributes products that
improve the radio link by suppressing interference and improving signal
handling in wireless network telecommunications systems. Our product
portfolio includes our Adaptive Notch Filter platform (ANF™), our Radio
Frequency Fidelity platform (RF2TM), and our product and service
solutions. ISCO's systems, when deployed as a network-wide solution, improve
the quality, coverage and capacity of a wireless operator's network.
CEOCFOinterviews:
Mr. Thode, what made you decide to join ISCO?
Mr. Thode: "The way I look at it is there are
two factors that come into make these types of decisions. I looked at all
the opportunities for leading a rapid growth technology company after a long
career of doing the same in Motorola. ISCO set quite well with my
preferences. Specifically, I believe ISCO is well positioned in a huge and
growing industry. If your goal is to be a large growth, emerging company,
clearly being in wireless is the right space and a piece of this industry
that is again starting to grow significantly is infrastructure. It is
exactly the right place to be in terms of a huge growing market. From the
perspective of the industry, it is consolidating. The cost structure of the
industry is such that it benefits from especially consolidating its physical
assets in terms of its real estate and tower space. I think the strategy
with ISCO is the right one. Our strategy is to support operators in a way
that we call full integration transparency. ISCO, having a unique RF
competency, has created a value added portfolio of products specifically
focused on integrating disparate technologies within legacy cell sites. It
is an ideal segment to play."
CEOCFOinterviews:
What are you selling to your customers?
Mr. Thode: "We
have two very specific product lines; one we call the Adaptive Notch Filter
platform (ANF™). It is a unique technology we acquired it from Lockheed
Martin Corporation (NYSE: LMT) in 2000 and have expended significant efforts
in expanding. One of the challenges of supporting a wireless technology with
a wideband air-interface is that it is susceptible to narrowband blocking.
What that means is that if you have a narrowband blocker, either do to other
wireless carriers in the cell site or other sources of interference,
essentially it reduces the quality, capacity and coverage of your wireless
service. ANF™ specifically is a piece of equipment that sits between the
antennas and the cell site, that very rapidly scans that wideband channel
and is able to effectively eliminate an in-band interference source and
return the capacity, quality and coverage of that site. It has had a
fundamental impact on Opex costs, specifically minimizing churn rate and
improving overall customer satisfaction issues at sites with interference
issues. The next product family that we have is one we call Radio Frequency
Fidelity platform (RF2TM). It comes in several unique
architectures, but what it is a state-of-the-art integration of filtering
and low noise amplification. We build in such a way that it is able to allow
the integration of different technologies into cell sites in a
high-performance, low-cost way and in a very transparent way. Essentially it
is tailored for a particular infrastructure vendor so that it is
plug-and-play compatible and totally transparent from an operations and
maintenance perspective and yet allows increased performance of that cell
site as well as frees-up antennas. This would enable operators to add new
technologies like EVDO to a CDMA cell site, for example. These are our two
primary product platforms, and I call them platforms because we are
expanding these products in terms of their coverage for different OEMs and
into different technologies as well as frequency bands during 2005."
CEOCFOinterviews:
Who is buying your products and how do you get them to buy more?
Mr. Thode: "In general, our products are sold
to cellular operators. Today, most of those sales are direct sales. We are
looking at different distribution channels that would improve our overall
reach of our portfolio. Essentially, I think you will find a linear
relationship between the growth of the wireless infrastructure segment of
the telecom market and our products. To the extent that the new air
interface technologies are introduced, or to the extent that new
capabilities in handsets create increased usage of wireless technologies,
these are all things that endear operators to expand their systems in some
way and to optimize their radio performance. This is why our products are
in-demand and why our sales have begun to increase."
CEOCFOinterviews:
Are you primarily in North America?
Mr. Thode: "Historically, the company has been
global. Today, primarily we are in North America and Latin America. We are
looking for opportunities in other regions. Our products are essentially
agnostic to the underlying technologies and more specifically related to the
spectrum that the technologies are used. To the extent that our products are
scaleable, and the wireless spectrums globally are somewhat identical, most
global operators face the same kind of problems. One of the major
initiatives that we are undertaking this year is to develop indirect channel
partners to support a number of different channels. This will enable our
products to get a more global reach without much additional R&D investment
in those products to do so."
CEOCFOinterviews:
Will you give us an idea of the competitive landscape for you and why
companies are choosing ISCO products?
Mr. Thode: "To be quite frank, there are few
competitors that match closely against our specific segment. There are many
competitors out there that do piece parts or component development in the RF
space. There are a number of companies that build duplexers or tower top
amps or power amplifiers or other components, but there are very few
companies that package those products in such a way as that they are
plug-n-play compatible in a particular configuration of an operator’s cell
site. The closest competitor to the RF2TM product is probably
from a company by the name of Super Conductor Technologies. As a general
rule, their business model is not a totally plug-and-play model nor do they
have a product such as ANF™. We don’t know of any company that has a product
like ANF™ that is able to remove jammers or interfering sources within a
wideband spectrum. We think we have a unique value proposition in that what
we do is take the best of solid state technology, particularly for the RF2TM
product, and integrate it in such a way so that it is tailored to be
plug-n-play compatible for a specific piece of OEM equipment. From an
operations and maintenance perspective, it is totally transparent. The
benefit to the operator is that after installation, it looks exactly the
same to their network operations."
CEOCFOinterviews: Do the operators know they
need this or do you have to show them that they should be using it?
Mr. Thode: "There are two key driving factors for operators, and it is a bit
of a pendulum swing as to which one gets most of their free cash for the
year. In years 2000-2002, when free cash flow was a challenge for
operators, they spent most of it on optimizing their networks and retaining
their customers. That is a struggle that operators have always had and will
continue to have because wireless is susceptible to more issues in terms of
its availability in up-time vs. wire line systems. It isn’t a new phenomenon
for operators and it has the tendency to get more free cash flow when cash
flow is smaller. It is table stakes for most operators. But starting in
2003, growth started to return to the wireless business. Operators were also
forced to begin to update their technology platforms to support new emerging
data driven services. As a result, operators have had a bit more free cash
flow and they have been forced to start spending it on capital to upgrade
their networks. The largest Capex expense when operators put in any new
technology is the real estate and antenna tower cost. It is difficult no
matter where you are at in the world to add brick-and-mortar to enable these
new capabilities. To stretch their capital dollars to ubiquitously deploy
the new technologies, operators struggle to find solutions to obviate the
need to add sites or antennas. In any case, whether an operator is seeking
to optimize their network or expand it, ISCO has products specifically
targeted to that need. In the area of optimization, ISCO provides products
such as ANF™ that significantly improve the overall performance of the
network while minimizing Opex expense. With products such as RF2TM,
ISCO enables the operator to add on or combine technologies while minimizing
Capex expense.”
CEOCFOinterviews:
Will you tell us about the financial picture at ISCO today?
Mr. Thode: "ISCO is a publicly traded company,
so the financial results are available for review. I think ISCO has
characteristically been a $3 million or so business over the last several
years, and has been struggling to achieve profitability. I think it is no
different than any after-market supplier in the infrastructure space where
it has been a tough market over the last four years. As I said though, we
believe that with the significant increase in Capex spending that operators
are investing right now for deployment of the new technology, ISCO is well
positioned to participate. We have specifically announced our results for
last year at about two-and-a-half million dollars in revenue and we have
already announced specific purchase orders for about $2.5 million in the
first quarter of 2005 already. On the surface, just looking at those
numbers, you can see that 2005 is shaping up to be significantly better than
we performed in 2004."
CEOCFOinterviews:
In closing, why should potential investors be interested and what should
they realize that perhaps they do not see when they first look at ISCO?
Mr. Thode:
"The Company was originally founded more than a decade ago, principally on
the premise that the superconductor technology would be the emerging
technology for wireless applications and infrastructure equipment. The
company made a key strategic decision about two years ago; that was a tough
decision but the right one. When we looked at the emerging technology that
was available today in terms of the evolution of solid-state electronics, we
concluded superconductor technologies will never be significantly attractive
from a cost benefit analysis. This is not to say that there may at some
point be some specific attractive point solutions for the technology, there
may be. We continue to have a strong patent portfolio in superconducting but
we believe as a general purpose solution and with a broad company goal of
trying to get presence in every cell site in the world, it clearly is not
the right solution. Consequently, the company made a strategic decision to
essentially shift from that business from a commercial deployment viewpoint.
I think investors need to know that the company can make hard decisions and
has made hard decisions and that this is an example. From there, the most
important thing for investors to understand is that the company from a cost
structure is sized properly, it is in the right segment of telecoms, and
that wireless infrastructure will be the hottest growth area over the next
several years. From our value proposition, we clearly play in an area in the
market where there are very few people with the value added approach we are
taking or the competency to deliver on that approach. We are a company with
a very long history; a publicly traded company with all of the liquidity,
and the transparency, that it brings. We are a company that is in a renewed
and growing segment of the wireless market, and have a unique value-added
approach to that market. Over the last two years, we have changed our
strategy and started to deliver two new platform products that we continue
to leverage by spinning those products into different portions of the
market. From that view, we have clearly turned the corner and are on our way
up. The evidence of that is the demonstration of relatively large orders in
the first quarter of 2005, which almost completely matches our entire
revenue production in all of 2004."
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