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Special Report: CIDCO
PICKING UP ON CALLER ID
You'd expect Robert L. Diamond and Paul G. Locklin to be exultant. In three years, they've taken Cidco Inc. from a blip on the radar screen to the No.1 maker of caller-ID gear. But don't expect swagger. Says Diamond: "We stay awake at night. We worry about every pin that drops. And we worry about every competitor. We cannot rest."
So far, the work and worry is paying off. No.5 on the Hot Growth list, Cidco saw sales nearly triple, to $100 million in 1994, while earnings rose 181%, to $11.7 million. The trigger for such growth: big demand for the service that identifies callers and flashes their name and phone number on an LCD screen before you answer. Forecasters predict new subscribers will double this year, to 6 million--and with 60% of the market today, Cidco is poised to pick up the lion's share. Says Diamond: "We happened to be standing there to catch the wave."
Cidco built its success on a winning distribution strategy. It sells only 15% of its devices through retail outlets, focusing instead on ties with phone giants. Many relay orders directly to Cidco's computer. Within 48 hours, the system is sent to the customer. Says analyst Nicholas P. Coutros of Alex. Brown & Sons Inc.: "Cidco is outsourcing the entire headache for the phone companies."
Good connections have been with Cidco from the start. It was founded in 1988, when longtime associates Diamond and Locklin got wind that phone companies wanted to offer caller ID. Both had industry ties: Diamond, 62, owned a New York-based consulting firm that did work for AT&T; Locklin, 49, had founded PCI Pte., a Singapore maker of LCD screens and cordless phones.
When word of caller ID got out, Diamond and Locklin each ponied up $50,000 to make a prototype with the help of a contract engineer. Eighteen months later, Bell Atlantic Corp. ordered 7,500 units. Cidco was on its way.
Today, Locklin oversees operations from tiny Morgan Hill, Calif., while Diamond builds sales out of New York offices. Cidco's stock, which debuted a year ago at $15, now sells at about $35. "We are experiencing something most people only dream about," says Locklin. "The industry is in its embryonic stage, and we're in the driver's seat." Could anything snarl their plans? The biggest risk is mismanaging the supernova growth. Given the work-and-worry mode of its founders, analysts aren't too concerned. Ask Locklin about his goals for Cidco, and he says: "Not to fumble." By Kathy Rebello in Morgan Hill, Calif.