5 Questions with C-Com Satellite’s Leslie Klein

5 Questions with C-Com Satellite’s Leslie Klein

C-Com Satellite (TSXV:CMI) is on a roll. The Ottawa based company, which designs and sells mobile satellite-based technology for the delivery of 2-way high-speed Internet services, grew its revenues by 23% in fiscal 2008, while reporting a record eight cents a share in earnings. The fourth quarter of 2008 was C-Com’s 19th consecutive profitable Q.

Recently, Cantech Letter took five questions from our subscribers for CEO Leslie Klein:

DVC:

(from Peter in Calgary): C-Com just put out some of its best
numbers ever in the middle of some of the hardest times any of us have
ever seen. What does this say about the business you are in? Is it
recession proof, or was this more related to the stage of growth the
company is at than any macro factor?

LK:

Since C-COM operates on a world wide scale and is not dependent on any
particular vertical market segment, we have a huge world wide market at our
disposal. For example while Oil and Gas companies are not as active as they
have been last year many new oil and gas fields are coming on stream and
C-COM is delivering solutions to them from Siberia to Oman.

Many police and fire departments are not as affected by their need for
communications as other segments of the industry and this market is just
starting to ramp for us especially in developing countries like South Africa,
Indonesia, Vietnam and elsewhere. Australia and New Zealand due to fires
there have suddenly become very active acquiring systems from us for
communications requirements from remote areas. Same with the military world
wide as well as with News gathering organizations world wide who are now
looking at a cost-effective solution to replace their aging and expensive
news gathering antennas with a more robust and less expensive C-COM
manufactured inetVu mobile antennas.

DVC

(from Kyle in Toronto) Is it true you are allergic to debt? At some
point you must have had bankers try to sell you on the “ramp up the
growth by strapping on some debt” strategy…

LK:

It is true. Both in my personal life and all the private companies I have,
we have never had any debt. Must be the fear of banks coming in and taking
everything you got because you are unable to pay them.
We get at least 3 offers a week (I am serious) from banks and other
investment houses offering us money. I laugh at them as I tell them that
our problem is not that we need money but to make sure the money we have is
generating some investment for us. I have learned long time ago that cash is
king. It allows us to carry extensive inventory of our antennas, pay a
descent wage to our employees and be able to ship 30-50 units at a drop of
the hat to anyone who needs it. This sometimes eliminates most problems with price issues or any other
issues the competition may throw up, as virtually no one in the industry can
do this and when you are serving the market for oil and gas exploration,
emergency, fire and police as well as the military and you can deliver
overnight almost any sizeable quantity of this type of product, while your
competition is quoting 4-6 weeks, you have the order in hand that much
faster.

DVC

(from Matt in Seattle) This may sound like a dumb question, but
isn’t what you are selling going to be free eventually? I am writing
this on a mobile device and leeching free internet from a coffee shop…

LK:

Nothing is free in life Matt. Your mobile device must have costs you a few
dollars either via the service you are paying for or you had to pay for it.
Please remember our market is a niche market and it is a world wide market.
While you may be able to surf the net from your downtown location in
Seattle, most of our customers are in the middle of nowhere and they are
also traveling daily to destinations where only satellite communications
exists. We can deliver through our antennas broadband speeds that may not be
available even in downtown locations for many years as most of our customer
do much more than browse the net and send emails. They transmit tremendous
amount of geological data and also receive that much for analysis and need
broadband that is really not commercially available. They also use the systems
for voice and video and have the ability to request a tremendous amount of
bandwidth for an hour or more and than return it and use the speeds you are
using for their daily office related work.
Our customers located in Asia, Africa and Russia (and in many other parts of
the world) for example will not be able to have Seattle type access where they
operate from for 50-100 years, if ever, as there is no economic reason to
have a coffee shop in the middle of a desert or in the most Northern parts of
Siberia, but there is business going on there and communications is just as
important to them there (even more important, I would say) than to someone
working away in a coffee shop. This where C-COM and its antennas come into
play.

DVC

(Tim in Paris, France) I know the Kitchener/Waterloo area is a tech
hot spot, but how is Ottawa for finding and retaining the kind of
employees you need? How about Canada in general?

LK:

Ottawa was actually the first high tech hub due to Bell Northern Research
(Nortel) being located here and myself included work there and learnt a
thing or two about technology. Many Ottawa business have deep connections to
these companies and many initial early start ups (Mitel, Gandalf,
Lumonics, Newbridge, JDS just to name a few) have had their origins in
Nortel.
I am a University of Waterloo graduate myself and when I graduated Ottawa
was the center of technology not Kitchener Waterloo. Today that has changed
slightly, but Ottawa still has it great share of good technical people and
there is no problem finding them.
Employees are sticking with Canada and we are seeing a reverse trend some
are interested in coming back from the US and we also get many requests for
jobs from US employees.

DVC:

(from Les in Burnaby) Your sales seem to be a mix of direct and
those you get through a dealer network. In my experience this dealer
network can go cold if you don’t tend it really well. How do you
motivate your dealers to sell your product?

LK:

Our sales are 100% through dealers for obvious reasons. We prefer them to
make money with the antenna and also sell installation, integration and
airtime to the customer and provide them with support. The dealer network is
very loyal, as many have become millionaires selling our product and they
know it is the best there is. We try to protect their territories and keep
sending them leads. We also bring them along to shows we attend or join them
at shows they attend and allow them close the sales themselves. We try to
develop more and more dealers in many parts of the world and since some are
going after specific vertical markets, we allow them to help each other in
the region as they really compete in these markets against each other and
they work together to assist each other with spares, training and support.
It is a challenge to keep this going but we have been very successful doing
this so far.

Disclaimer: The DVC SmallTech Letter is supplied for information purposes only. Dollarton Venture Capital makes all reasonable attempts to ensure the timeliness and accuracy of the information provided in our website. However, there are no representation or warranties as to the accuracy, reliability, completeness or timeliness of such information. This information should not be construed as investment advice and is not intended to solicit the buying or selling of any stocks mentioned. Investors should complete their own due diligence before making any investment decisions. From time to time Dollarton Venture Capital may profile our client companies or companies we have personally invested in. In these cases we will expressly disclose this relationship.