Brooktrout jets high over converging territories - Company Business and Marketing

Communications News, Sept, 2000 by Ken Anderberg

All the seats but one on the plane were full when Eric Giler, CEO of Needham, MA-based Brooktrout, climbed on board. He moved toward the empty seat at the front of the aircraft. Then, calmly strapping himself into the pilot's chair of the 10-seat Cessna Citation II jet, Giler lifted the plane from the tarmac in Boston and proceeded to ferry his cargo of Brooktrout employees to an important trade show in Atlanta.

Giler and Brooktrout are indeed flying high these days. The developer of circuit board and software products for communications applications saw its core revenues increase by 35% in 1999 to nearly $136 million. Net income for the public company climbed by nearly 70% over 1998, to $13.7 million. First quarter 2000 revenues continued the high-flying sales pattern, with revenues reaching $35 million and earnings per share doubling over the same period in 1999.

For Giler, the recent financial record reaffirms the 16 years he has spent building Brooktrout into a 500-employee player in what he calls the "New Network."

"New Network, to us, is sort of the big connection point between the telephone network and the Internet, and all the things that go along with that," Giler explains while taking a break from exhibit floor meet-and-greet duties at Supercomm 2000. "We're trying to enable our partners to play in this New Network, to provide them with solutions by specializing in this particular intersection. The business opportunity, if you execute it reasonably well, is huge."

In fact, sales for his New Network product category grew by 80% last year, as compared to a 15% increase in revenues for the company's traditional products for fax, LAN fax and voice mail--what he refers to as "Today's Network."

Trained as an industrial engineer at Pittsburgh's Carnegie Mellon University and an entrepreneur by age 28, Giler--now 44--is not daunted today by the lofty growth of Brooktrout. In fact, he fully expects to reach the billion-dollar sales level within a few years. "When I started Brooktrout," says the Connecticut native, "I wanted to build a $100 million business. We passed that a couple of years ago. Now, we have the opportunity to build the first billion-dollar business in enabling technology in this New Network, and we figure we can do it in about five years."

The engine for that growth, as Giler sees it, is the company's New Network product line, which brings together data, voice, wireless and the Internet, allowing customers to seamlessly integrate their standard, circuit-switched telephone networks and the new generation of packet-switched digital Internet protocol (IP) networks carrying wireless and Internet traffic. Voice over IP, unified messaging, speech recognition and Web-based messaging services are key applications enabled by Brooktrout's voice boards, Universal port boards, mobile switching equipment, high-density IP telephony platforms and network access platforms.

The company's recently introduced TRxStream Series, for example, provides high-density voice-enabling technology with the flexibility of an open-systems environment. T 1, E1 and ISDN interfaces are all integrated into these products, which are sold primarily to the fast-growing service-provider market. Brooktrout counts among its clients such companies as Lucent and Nortel.

The potential for the company's voice on the Internet enabling products, in fact, clearly excites Giler. It should. That market accounted for less than 1% of global telecom traffic in 1999, he says. By 2003, that number is expected to rise to 17%; by 2005, to 30%.

Giler has had his head in the clouds and his goals in the stratosphere since he earned his MBA from Harvard 18 years ago. "I always wanted to start a business since the time I was a little kid," he says.

After a stint at Teradyne in Boston, in the marketing department, he started Brooktrout: "At 28, the kind of advice I got was like, `You should wait until you're at least 30 before you start a business.' Today, that would be middle-aged.

"Brooktrout was started on the basis of digital signal processing," he continues. "We actually didn't call it convergence then. We called it voice data image communications. It was very much the idea of using a central signal processor for combining different media types, as opposed to doing it through hardware."

His Harvard MBA degree was not so useful when he first started out on his own, Giler admits. Once, he was asked to share his insight and advice as the commencement speaker at Carnegie Mellon's Undergraduate Business School. "One of my pieces of advice, which got nervous jitters from the faculty, was that very little of what you learned in school is very useful at all.

"As the business has gotten bigger, some of the stuff I learned is more useful than when I started the business," he adds. As to the MBA, "I figured if the business failed, I could always get a job."

Failure does not seem an option now. Where once Giler's main challenge was in gaining marketplace acceptance, today Brooktrout is growing so fast that the company is investing in and even spinning off other companies.