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Vicinity
Corporation - helping some of the most well known brands promote the local availability of
their products and services
Technology
Computer Services
(NASD:VCNT)
Vicinity Corporation
370 San Aleso Ave
Sunnyvale, CA 94085
Phone: 408-543-3000
Charles W. Berger
President
Chief Executive Officer
Interview Conducted By:
Diane Reynolds, Co Publisher
CEOCFOinterviews.com
October 2002
Bio
of Charles W. Berger, President & CEO
In
his 26 years in high technology, Mr. Berger has been responsible for successfully building
companies, developing new products, leading mergers and acquisitions activities, and
ultimately making public companies profitable. Most
recently, Mr. Berger was president and CEO of Ad Force, Inc., a provider of on-line ad
management and delivery services, which was sold to CMGI in January 2000. At Ad Force, Mr. Berger led the development of
the company from 25 people with no executives or revenue to a 300-person company, with
operations in Europe and Asia, a strong executive team and annual revenues in excess of
$30million dollars. He also led the
company’s IPO, raising more than 470 million in a challenging market. Prior to Ad Force, Mr. Berger was chairman and
CEO of Radius, Inc., a Macintosh peripheral and software developer. At Radius, Mr. Berger returned the once falling
company to profitability, and attained a 35 percent revenue growth in his first six
months. He has also led the acquisition and
integration of several technology companies at both Ad Force and Radius and while at
Radius acquired the company’s largest competitor, increasing revenues to more than
$300 million per year. He has also held
various senior management positions at Sun Microsystems, Inc., and Apple Computer, Inc. Mr. Berger holds an MBA degree from the University
of Santa Clara, and a Bachelors of Science in Business Administration degree from Bucknell
University. He serves on the business
advisory boards at both the University of Santa Clara and Bucknell University.
CEOCFOinterviews: Can
explain to my readers, who is Vicinity Corporation and what is it involved in?
Mr. Berger:
Vicinity is a company that has been in business for about six years and we have been
focused on helping some of the most well known brands such as Marriott Hotels, McDonalds,
Federal Express, Shell Oil, Mercedes Benz, and 320 other customers promote the local
availability of their products and services. By that we mean we use their website, which
is often the first place a consumer goes when they are looking for a product or service
related to a particular brand, to find the closest place to buy that product or find that
service. If you go to Marriott’s website
and you want to find a hotel in the city that you are going to it’s our technology
that Marriott uses to tell you the options. If
you are going to Charleston West Virginia, for example, our service informs you there are
five Marriott hotels there and how to get to them and what other services are available in
and around the hotel.
CEOCFOinterviews: Is this done through a leasing agreement or just
buying the product to enable the websites to do this?
Mr. Berger:
It’s not exactly a leasing agreement but we are a web services company, so for the
bulk of our customers, when consumers are accessing that type of service on their
websites, they are actually coming into our data center and our servers where we do the
inquiry for them and give them the results back on to the website of the customers that we
have. We are really what used to be called an
application service provider or in today’s terms a website provider where we sell the
service. We are not shrink-wrapped software.
CEOCFOinterviews: With everything that is going on, the web is a
phenomenal source, are you addressing the issue of security?
Mr. Berger:
We are obviously always concerned about security, but that’s an aspect that we
don’t deal with since we are not actually selling products on the Internet, we are
just helping people find an off-line or brick and mortar store where they can buy a
product. We are not taking any sensitive
information; so we really never have any of the consumers who use our services have any
concerns about security. They are not giving
any information about themselves, no credit card information, they are mostly just asking
for the closest location for products or services.
CEOCFOinterviews: When you visit a website and a message appears
that you are entering an “unknown source” or “unknown web destination”
it is a little more in-depth. Is this somehow
protected from viruses that I am not going to go to an unknown area that is off the beaten
path?
Mr. Berger:
Well, because we are actually part of our customer’s, whether it be FedEx or General
Motors or any of our customer’s websites, you don’t get that message because you
are still in the secured environment created by that customer. Even though they are accessing data from our
servers, we take extreme measures to make sure that only valid users coming in through our
customers websites can access our information. We haven’t had a single incident and I
am sure that we won’t going forward. So, you can go to a Marriott website and feel
very secure that won’t have a bad impact on your machine or your files or
information.
CEOCFOinterviews: How often do you update, you are dealing with a
lot of different customers. Information
changes, it could be a different hotel added in or one taken away or for example,
McDonalds?
Mr. Berger:
We have tools built into our system to make it very easy for McDonalds, or Marriott or
FedEx -- think about how many FedEx drop boxes are all over the country -- to very easily
get onto a protected website and update that information, so on a daily basis or hourly
basis our customers are updating that information to make sure the new facilities that are
opening are properly recorded and any of those facilities that are closing, of course, are
taken out of the database. So, all day long,
literally on a real time basis, that data is being updated.
CEOCFOinterviews: You are doing this on a global basis, or are you
strictly here in the US?
Mr. Berger:
We’re very global because many of our customers, again not to keep picking on
Marriott, but Marriott has hotels all over the world.
They want anyone who is in the US or anywhere around the world to get
on to their website and find a hotel, whether it is in Philadelphia, Pennsylvania or
Singapore or Beijing, China. So we have
facilities for all of their use globally and then the capability to do maps and driving
directions in a significant part of the world as well.
CEOCFOinterviews: Something new that you just got a patent on,
called “Line drive”. What is that
all about?
Mr. Berger:
If you ever access maps on the Internet you generally get a two or three inch map that is
in a variety of colors with every single street in that map area and every single street
name and lots of other information. If all you are trying to do is to get from point a to
point b it is hard to figure out from a complex dense map like that exactly where you need
to go and exactly where you need to make turns. So,
we developed the technology called “line drive” which only shows the line that
you need to travel. If there are five turns
it just shows those streets without the other noise in the background. It is just less confusing and then we also rescale
the map so that the hardest parts or the most complex parts of the journey are enlarged
out of scale so it’s much easier and much clearer to figure out where you need to
make turns. For example, I go from the Boston
airport to our facility in Lebanon, New Hampshire often and there are about ten turns I
need to make in Boston that happen in the first ten miles of the trip and then there is
about 120 miles that you are just on three different freeways. So, if that map were drawn to scale and not on ten
pieces of paper you wouldn’t be able to see the small detail of turns in Boston. We rescale it based on complexity, not the real
geography, and make it easier to use maps when you are drawing a map to get from point a
to point b.
CEOCFOinterviews: That is a really valid and important technology
that is now being used more than before.
Mr. Berger:
Mapping services are one of the most popular uses of the web. We see that over and over again and our customers
see it. One of our customers, Baskin-Robbins,
has a free scoop day in the beginning of May and on the day that they have that they see a
15-20 times increase in the number of visitors to their sites. It’s all people going
to their sites to see the closest Baskin-Robbins to get a free scoop of ice cream, believe
it or not!
CEOCFOinterviews: Do you get
the revenue per inquiry or is it a flat rate?
Mr. Berger:
Our business model is a recurring revenue model. It
has two components to it. We have a range of
services that people can buy based on complexity based on customers and how much map data
they want to use and some additional services we offer, and they pay a flat fee at the
beginning of the year based on the services that they are going to buy and make available
to their customers. Then we have a buy in
based pricing based on how many people visit their website and try to get location and
mapping information. The great thing about
our business model is, we have a 90% renewal rate with our customers and each year they
buy about 20-25% more volume and services from us. We
have now sorted out which companies aren’t going to make it through a tough economy,
and have built in a 10-15% growth curve.
CEOCFOinterviews: Does this
take a lot of manpower on your end to keep this current?
Mr. Berger: No. We have two kinds of data, map data, which is
collected by three companies here in the US -- a company called GDT, NAVTECH and another
called TeleAtlas. Those are very people intense businesses and we are able to get
very competitive pricing since three of them get that data at a very low cost. Then
there is the data of all of our customer locations and our customers have that data and we
make it very easy for them to put it into our system from any format that they have it in
their database. So, we move their database to our database and it’s really efficient.
CEOCFOinterviews: With all of the services you are now offering,
including the new “Line Drive”, investors are wondering where does this company
go from this point?
Mr. Berger: Two things, one the service we provide today we think
has a lot of ongoing possibilities. There are still a lot of large chains of stores,
hotels, secondary automotive companies, healthcare groups, banks and financial
institutions that don’t have this type of capability as part of their web presence,
so there is significant growth in the markets we are in. We are looking into new
markets, like the government. I don’t know if you have tried to find your local
social security office lately or a welfare or unemployment office, but if you go to the
Internet sites for state, local or federal government, they are not very helpful. There is
a fair amount of legislation to make these agencies be more accessible to their
constituents, and we can be apart of that, so you can see growth in the government market.
Finally, we offer an important service to many of the most well known companies in
the world, and that puts us in a strong relationship with the marketing department of
those companies which over time means we can offer new services and new products we think
will provide substantial growth going forward.
CEOCFOinterviews: What is it you feel will keep this company
uniquely positioned?
Mr. Berger: First of all, we have a great customer base already,
because we were one of the first to the market and we have done well by those customers.
Secondly, we have a real understanding of not just maps and driving technology,
where there are other companies that have that including the big giant in Microsoft, but
how to use that technology to help market your products and services and really attract
people to your off-line locations to spend money. Then thirdly with a great
technology team we think we can continue to keep the technology leadership as well as
continue to bring new products and services to bear.
CEOCFOinterviews: Going forward, is this company going to be driven
internally or from an outside source of a joint venture or acquisition?
Mr. Berger: It will be both. Our current plan is for growth
in the 20% area organically from our internal growth. We are blessed with a very strong
balance sheet with over $80 million in cash and that gives us the flexibility of doing
acquisitions, an area where I have some experience. We know to be very choosy there and we
will over the next 12 months make a significant quantum move by some sort of acquisition.
CEOCFOinterviews: Will the acquisition be driven towards the
technology the company has or the customer base or a little of both?
Mr. Berger: It would hopefully be a technology-based company that
is in the same market we are in that is selling services to the marketing departments of
Fortune 2000 companies all around the globe. It would be a common
customer and some common technology but a significant revenue stream that we could add on
to ours and get some cost efficiencies with one company instead of two.
CEOCFOinterviews: What would you say to a potential investor?
Mr. Berger: That we have a very experienced and very good
management team that is beginning to show very positive results in our financials, such as
getting close to breaking even and beginning to show revenue growth again. It’s
a group of people who are here for the long term, not just getting the trend started, but
to keep the momentum going over several years. We have a strong balance sheet to
enable us to be here for the long haul with not only our core business but to expand
beyond our core business to create both revenues and earning growth. We are in an
area that clearly most people believe is the growth part of the market, which is using the
online or Internet web presence to generate much more business not only for online
transactions but also for the 85% or 90% of transactions that still occur off-line.
We are a very real and tangible bridge between the online and offline world where people
go for information online and offline to buy the products.
CEOCFOinterviews: Some people believe that computers will take away
the brick and mortars.
Mr. Berger: Very few people believe that anymore. That was in
vogue two or three years ago, but as often happens with new channels, the Internet was a
place to go to buy products. New channels take their place in the market and they
get a portion of their share of sales in the market, but the old channels don’t go
away, almost never. There are lots of ATMs and lots of branch banks, and people do
buy books online but there are still a whole lot of people who go to the bookstore to buy
the books in stores and malls around the country. It is great when a new channel
opens and it usually expands the market but it rarely becomes the whole market.
CEOCFOinterviews: Do you have any closing comments for my readers?
Mr. Berger: I think what I said a couple of comments ago summarizes
it best -- we are the real tangible link between people who are finding information online
to being able to buy that product offline, and we will continue to strengthen our services
to expand that connection. With a strong balance sheet and deep management team we have a
good revenue earnings growth going forward.
CEOCFOinterviews:
Thank you.
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