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New
Visual Corporation (NVEI) |
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CEOCFO CEOCFO Monthly Analyst |
"To print this page go to file and left click on print" New
Visual Corporation – developing technology that will allow Telcos to transmit
enhanced voice, data, and video services over copper wire Bio of CEO, Additionally, the company plans to exploit
unique features of Embarq technology, such as low latency, small frame size, and receiver
intelligence, to develop products that allow for the placement of multiple repeaters, thus
extending the reach even farther. CEOCFOinterviews: Mr. Ketch, please tell us about the industry that
New Visual is focused on and the opportunity for you? CEOCFOinterviews: What is it that you have and what does it do? Mr. Ketch: “The Semiconductor is a chip that will be installed
and used in equipment that the telephone companies buy.
This equipment will be attached to the regular copper wires that are already
serving businesses and homes around the world. Once the equipment is attached to these
wires, it will allow the wires to transmit data faster and farther than it has before.
Telephone companies will use this data to launch services like high-speed Internet and
video and other types of business applications.” CEOCFOinterviews: Where will the equipment and chip be housed? Mr. Ketch: “It will be in a building and at the central
office. That is the point in the Telecom network that is the onramp to the high-speed
fiber optic links that now go around the world. What we have seen with Telecom in the last
few years is a massive over-investment in the fiber-optic infrastructure. The over-looked
area was in what is referred to as the ‘last mile,’ which is the link between
the CO (central office) and everybody’s business or home. That last mile serves as a
‘choke point’ to us all getting high-speed data. Our chip will open up that
‘choke point’.” CEOCFOinterviews: Will your technology be used to reach homes as
well? Mr. Ketch: “Yes! However, the first versions would go into
businesses and be placed in network equipment that businesses already deploy everyday. In
the home, it could reside in a DSL modem or a cable modem that goes on top of the
television, or in some other type of home gateway box. Even a PC.” CEOCFOinterviews: Is your product offering very different from your
competitors? Mr. Ketch: “There are other semiconductor companies in the
broadband telecommunications space who are attacking the same problem. Like any other chip
business, this is just about us being the latest to market with the fastest chip. It is a
‘leap-frogging’ and others will ‘leap-frog’ us in time. That is why we are gearing up to continue to
develop new chips and new generations of products.” CEOCFOinterviews: Where do you currently stand with development and
bringing your product to the market? CEOCFOinterviews: Your customer then is not the Telco but the
manufacturer selling to the Telcos, is that correct? Mr. Ketch: “Correct! It
is a little bit of an indirect sales model. We hope that millions of our chips will flow
to telcos here in the U.S. and worldwide, but we will never actually sell directly to
them. Our sales model is to their existing equipment suppliers that are already
established.” CEOCFOinterviews: Is this a partnership relationship or are they
customers? Mr. Ketch: “They are our target customers and they are
informally working with us in this stage of our development to make sure that we hit the
bulls-eye. This is a highly complex product, which must be designed with the need of the
specific equipment manufacturers in mind. It is a highly concentrated group of customers.
There are only a few hundred companies worldwide which we target, but they buy in
extremely high volumes. We are making sure that our approach and they way we finish off
the product is going to meet their needs.” CEOCFOinterviews: How will you be manufacturing the Chips? Mr. Ketch: “We will not be creating our own fabrication
plants; we will be utilizing someone else’s. We haven’t decided who that is
yet.” CEOCFOinterviews: The Telecom industry is in pretty bad shape;
obviously that has to affect you because people aren’t buying new equipment, or are
they and we just don’t know it? Mr. Ketch: “This is a ‘melt-down’ of unprecedented
levels in United States history and probably world history. The number of jobs lost and
the amount of market cap wiped away has far exceeded what happened to the Dot.com
‘melt-down.’ The whole industry has gone through the period of crash, and now we
are in a period that the FCC (Federal Communications Commission) termed
‘catatonic.’ We actually believe that at New Visual this plays well for us
because we are not shipping products yet; we are still developing and releasing that first
product. I think our timing is going to be good; we will have our high-volume, low-cost
product out the door when the rest of the industry
--equipment services -- starts to pick up. Another way that this meltdown has
benefited us is that our competitors are slowing development of new chips. We believe that we are one of a very few
companies in what is normally a highly competitive worldwide industry that is actually
rolling out a new product in 2003.” CEOCFOinterviews: Then getting companies to look at your new
material is not a problem. Mr. Ketch: “We are attracting interest and long-time industry
insiders and relationships are very important to getting a new chip company
launched.” CEOCFO: What is your main challenge right now? Mr. Ketch: “Raising the capital that we need to continue to
develop out this product is our main challenge right now. We are already public, which is
a little unusual for a company at our stage of development. We are finding that Telecom as
a stock sector is one that most folks have rotated from right now. However, we believe
that they will rotate back eventually. We have a period here where we are working very
hard to tell our story and attract the capital that we need to continue.” CEOCFOinterviews: Are you being lumped in with Telecom and if so
what would you like to say to people in the investment community? Mr. Ketch: “I do believe that we are lumped in with Telecom.
When we speak to private investors and private funds about the opportunity at New Visual,
the conversations typically do not focus around our break-through technology like you
would think they would. Instead they focus
around how much has been lost in Telecom stocks over the last three years, and how scared
private funds are of taking a position beating. They don’t understand why the bets
that were made two or three years ago proved to be so disastrous, and therefore they are
not sure how they would make a bet going forward. We believe we have a compelling story. I believe now is the time where the seeds of the
rebuilt telecom industry are being sowed. We absolutely believe this is the right time to
be investing in semiconductor technology.” CEOCFOinterviews: Why do you need additional capital? Mr. Ketch: “Specifically, to make the leap from a prototype to
a finished ASIC (Application Specific Integrated Circuit), which is a capital-intensive
chip. We are now at the stage where we need to build out a fully formed semiconductor
company and move beyond being an engineering-driven development effort.” CEOCFOinterviews: What final pieces to your company’s
organization and development need to be put in place? Mr. Ketch: “We need to create the final product. We also need
to create the sales and marketing, customer care, operations and other infrastructure type
functions that we know we are going to need down the road. Companies in this industry tend
to go from small to large. Look at the history of many of the publicly held broadband
stocks; if they have a hit, they go from small to very large very quickly. We believe we
are going to have a hit and our plan today is to not be caught by surprise by the demands
of growth. We need to fund that growth phase. We will use cash at least a few quarters
before the period of time that we are generating the revenues and positive cash flow that
other companies in our sector generate.” CEOCFOinterviews: I would suspect there are a lot of people around
from the industry available, where at one point they were not, which might make it easier
to get the right people in place! Mr. Ketch: “That is a great comment and it is true.
Fortunately for us, stratospheric salaries are coming down. There was a gold-rush
mentality in the 1990s, which was replaced by what feels more like normal Telecom industry
practices. This is starting to feel more like a sustainable industry, and that raises our
comfort level. The gold-rush period was difficult for us veterans because there were silly
things happening, amazing salaries and marketing costs that were being incurred that were
ridiculous. What I see over the next few years laid out in front of us is a return to
normal profitable and sustainable levels. I like predictable cash flow, attaining promises
that were made. Taking wild, giant bets on the future that are undefined isn’t the
way to bolster value.” CEOCFOinterviews: You’ve had some settlement obligations; is
that all cleared? Mr. Ketch: “Yes, and more information will be disclosed in our
annual report. The press release is complete and accurate. There are no more over-hanging
issues or payments, which have to be made and fortunately, that is part of our
company’s history now.” CEOCFOinterviews: Are there patents involved in what you have
developed? Mr. Ketch: “There are. Both issued and applied for. Around September, we did a press release to make a
fuller statement about these patents and pending applications because there are many of
them and they are international in nature. We have a development partner -- Adaptive
Networks, Inc. (Private). They serve as our
development shop and the patents are shared with them. The number of employees that we
have at New Visual is very small but it is supplemented by many engineers that are
dedicated full-time to the development of the product over at Adaptive Networks. We own
that development with them, but are exclusive owners in our space.” CEOCFOinterviews: Will your product be more cost effective just
because it is faster and better or is there another cost benefit? Mr. Ketch: “There is -- and a powerful one too. Today, when a
telephone company receives a request from a business for very high-speed services, the
Telco, many times, can only deliver that service if they put it in fiber optics. Putting
it in fiber optics means digging up the street in front of their building and running that
fiber along whatever path it takes to get it from the central office to the business. That
costs a quarter, to a half-a-million dollars per mile. That is not including the cost of
electronics, sales and marketing or anything else. It is pure capital expenditure by the
Telcos to run fiber to a building. CEOCFOinterviews: So you decided to make use of something that was
being overlooked? Mr. Ketch: “Yes, when all the fiber optic activity was going
on, the copper was just sitting there being ignored and we decided not to ignore it!” CEOCFOinterviews: Do you see the need to address the industry
through trade shows or trade publications? Mr. Ketch: “Both. I
think if I had a very large budget we would be doing some things but not a lot. I think we
will be ‘turning up the heat’ in the summer and fall --coinciding with the
release of the final product.” CEOCFOinterviews: In closing, what should people remember about New Visual Corporation? Mr. Ketch: “We have a solution that will fit on the copper wires of the world. There are a billion copper wires currently installed. So, if we have a hit, the hit would be multiplied very quickly by large numbers. As large and exciting as that is, it is still only part of the picture because two thirds of the world has yet to make its first telephone call. Telecom is going to continue to be a major global industry for my lifetime and everybody else’s to come. What we are doing is getting a ‘seat at the table’ as a new semi supplier with a very ambitious family of new processors that are positioned for the recovery of the Telecom industry.”
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