MAKING THE RIGHT CALLS AT U.S. ROBOTICS
Local school teachers in Skokie, Ill., regularly ask U.S. Robotics Inc. if they can drop by and show their classes the latest in high-tech robots. Unfortunately, they learn that the company doesn't have a single android in its facilities--its name was chosen as homage to science fiction writer Isaac Asimov. Since its founding 16 years ago, U.S. Robotics has concentrated on modems, those little devices that allow computers to communicate with other computers over telephone lines.
U.S. Robotics doesn't have the brand-name recognition of Hayes Microcomputer Products Inc., which pioneered the consumer modem market. But Robotics co-founder, president, chairman, and chief executive, Casey G. Cowell, hasn't the slightest worry about the obscurity of his logo. Rather, he has much to be pleased with: In its fiscal year ended Oct. 2, company revenues jumped 43%, to $112.4 million. And net profit also increased from $9.5 million in 1991 to $10.8 million for 1992.
IN-HOUSE JOB. Cowell is especially happy because U.S. Robotics, which raised $26.6 million in a public offering in 1991, is taking off when the overall U.S. modem market is in decline. Intense competition and falling prices caused the market to contract from $1 billion in 1990 to $856 million in 1991, says market researcher Dataquest Inc. During that time, U.S. Robotics jumped four places to become No. 4 in the market with an 8.3% market share, after Hayes and two Motorola Inc. divisions, Codex Corp. and UDS Inc.
U.S. Robotics is outpacing the industry for one very simple reason: It's often first with the most advanced products, says Dataquest Analyst Joseph A. Noel. To ensure that lead, the company is the only major modem company to build its own "data pump," the computer chip set that determines features such as the speed at which information is transmitted. Hayes and other manufacturers purchase chip sets from outside suppliers such as Rockwell International Corp. By building their own pump, U.S. Robotics' engineers can design the modem to perform to their own specifications--and quickly move to new speeds and features as they become industry standards.
For example, in 1990, most modem manufacturers were selling devices that complied with an industry standard known as V.32, which allows computers to send data at a speedy 9,600 bits per second. But U.S. Robotics was already working on a modem that used the then unratified V.32bis standard, which transmits at 14,400 bps.
The gamble paid off. U.S. Robotics got its V.32bis modem to market six months ahead of the competition, giving it the top slot in that particular market, with a 42.8% share, says Noel. Motorola's Codex division is next with just 13.4%. What's more, since the demand for V.32bis modems is expected to grow about 30% in 1993, Noel says, it's "very clear U.S. Robotics will be tops" in that market.
But Cowell knows that kind of growth won't last very long. Falling modem prices will continue to put the squeeze on U.S. Robotics as well as other modem makers. So Cowell says his engineers have come up with a new design for the company's existing modems that will lower production costs by reducing the number of parts. And he is counting on new revenue from emerging foreign markets. U.S. Robotics has a French subsidiary and in 1989 bought Miracom Technology Ltd., a British modem maker.
MORE HOOKUPS. Of course, the company won't give up on looking toward faster modems. It claims that its current line of V.32bis modems is upgradable to conform with the next modem transmission standard, nicknamed V.Fast, which uill allow computers to share data at 28,800 bits per second. That's close to the limit for standard analog phone lines, but V.Fast won't be ratified until mid-1993. Other modem makers, such as Motorola's Codex unit, are also developing V.Fast models.
U.S. Robotics is pushing into areas of data communications that go beyond simple phone connections--and the cutthroat hardware business. Cowell is setting his sights on combined hardware and software offerings that connect local-area networks (LANs) at different sites. Recently, the company introduced Shared Access, a hardware/software package that allows computers on a LAN to connect with other machines that could be hundreds of miles away.
Cowell's plan should keep U.S. Robotics on an industry-beating growth path. Steven D. Levy, an analyst at Hambrecht & Quist Inc., predicts a 30% revenue gain, to $145 million this year. That's certainly good news for company stockholders, who have seen the shares increase 60%, to 20 3/4 since the initial public offering. But it could also mean spending more time on the phone telling inquisitive people that there are no robots at U.S. Robotics.Paul M. Eng in New York