CommScope's Executive Vice President And Head Of The Company's Enterprise Division Provides His Take On The Current Economic Upheaval, And Discusses A Host Of Other Issues Including How The Purchase Of Andrew Has Worked Out.
January 1, 2009
CNS: Let’s jump right into the economy. What are your personal thoughts about what is currently transpiring?
Crenshaw: Certainly there are a lot of people smarter than I that didn’t see the magnitude or the severity of what is going on. The biggest concern for everyone is not what we know, but what we don’t know and how deep and how severe it is going to be.
I have explained to my people here it’s almost like trying to measure the depth of the ocean with a yardstick. You don’t know if it is a metre or a thousand metres deep.
It’s the uncertainty that is the big thing and the longer the uncertainty goes, the more things are delayed and the inertia tends to slow.
In previous economic upheavals, it’s either been isolated or there was a place to hide. This down turn is quite broad and unsettling. My personal assumption is that the overall economy is probably going to get worse before it gets better.
CNS: How is CommScope as a company approaching the downturn?
Crenshaw: I have used the word measured. We have been in the industry a long time and the management team at CommScope is a very cohesive group that has been together for many years dating back to the late 1970s.
While we have not seen this exact downturn before, we have experienced some challenging periods of time. We are certainly going to be cautious. We will make sure that we are conservative in what we do and potentially scale back some initiatives, but stay focused on our long-term strategy and staying close to our customers.
Despite a challenging economic outlook for 2009, ongoing demand for bandwidth continues to create opportunity. IP traffic growth in wireless markets, communications infrastructure needs in emerging markets and data center demands all create opportunities for CommScope. We have also expanded our market, customer and geographic diversity with the acquisition of Andrew. In addition, through the Andrew acquisition, there are a lot of opportunities to help improve our cost position and global position. I would definitely say our response to the current situation as measured at this particular point. We will, however, continue to balance manufacturing with customer demand.
CNS: Judging by your third quarter financials, it appears the purchase of Andrew was a good move. How difficult or easy has the merger been?
Crenshaw: It is keeping with our overall strategy, which is to be a total solutions provider for our customers. We see both the wired and wireless as being synergistic, but mergers are never easy. I will say, however, we do see a lot of commonalities between this merger and the Avaya acquisition. We have a formula, we have a strategy and we think there are lots of natural synergies that have and will continue to come from this merger. It will make us a stronger company that delivers even greater benefits to enterprise customers. We are very happy with the progress so far and we believe it will pay dividends long-term for our customers and shareholders.
CNS: The wireless side of the business is clearly key to CommScope moving forward. What is the Wireless Innovations Group all about?
Crenshaw: We see the wireless and wired as really being an issue of convergence — they are complimentary. If you scroll back a few years, everyone was tethered to a PC somewhere trying to get his or her e-mails, but that has shifted to a mobile device. We still see opportunities. To begin with, wireless requires a lot of wire. There is probably more value in the wired part of wireless than there is in conventional broadband architectures. Anything that consumes bandwidth naturally improves long term demand for our products.
There is still a large need for a broadband high-speed capability for transmission for data and video. We don’t see them as displacing technologies, per se, but see them as complimentary technologies.
CNS: From an enterprise perspective, how much interaction occurs between Andrew, SYSTIMAX and Uniprise?
Crenshaw: One of the areas where there is a lot of crossover would be in the DAS or Distributed Antennae System inside a building.
Certainly as a 3G or 4G communication device becomes more ubiquitous throughout a commercial building, there is going to be demand for universal coverage. Andrew has a leading solution in that space, but it’s really coming from the carrier today and it’s viewed as a service enhancement type of approach.
If you come at it from the enterprise space, now you have to look at it as a service differentiator and the ability to provide ubiquitous wireless coverage in a building and either lease it or provide it as an enhanced service capability. Additionally evolving building codes may soon require ubiquitous wireless coverage for life safety requirements. We think we are well positioned. We have the potential to take what has been a carrier product and apply it to to the benefit of the enterprise market.
Moving into the future, wireless also integrates into the intelligent building applications that we see. In summary, there is a good marriage and good synergy between all three divisions of CommScope.
CNS: Our cover story this month examines the intelligent building space. What role is CommScope playing in this market and what opportunities exist?
Crenshaw: Lucent was an early pioneer in what we call IBIS — The Intelligent Building Infrastructure System–and it was a little ahead of its time. Frankly, that is one of the side benefits of a slowing commercial real estate market in North America and Europe in that it may allow the architects and designers time to rethink how they deploy the infrastructure within a building. It is also going to give the appliance providers time to refine and provide Ethernet interfaces for their devices.
Typically what happens today is that a general contractor wins a project and they farm out electrical one place, security another place, HVAC somewhere else and access control to somebody else. You have all these disparate systems.
Intelligent buildings used to be a like-to-have thing, but did not make much economic sense. I think it’s going to make compelling economic sense as you look at POE devices where you don’t have to run a 110V to a remote location, you can integrate low power and higher power devices and build a complete new infrastructure on an initial capital cost basis.
In the past, people attempted to justify an intelligent building on a total cost of ownership basis in which they paid a premium initially. I think it will evolve to the point where it is more cost effective to use Ethernet protocol to drive your entire infrastructure in a building of the future as it relates to green, intelligence and a lot of the attributes owners will want to have.
This collective pause in the commercial real estate build out may give architects, engineers and equipment providers time to come up with a new way to bring these advances forward. We can use our intelligent infrastructure to manage and control and help the building owner understand where everything is connected and where the critical of applications breaches exist. We think it plays very strongly in our portfolio of products.
CNS: There is not a lot of “greenness” discussed around intelligent buildings, but I think it’s fair to say that will soon happen.
Crenshaw: So many buildings are poorly utilized and use very generic lighting, HVAC, drapery controls, security, etc. As people become more environmentally conscious, conservation is going to become a requirement that will be built into many codes.
CNS: Your company recently joined an organization called the Green Grid. What is it all about?
Crenshaw: CommScope has always been an environmentally conscious company. We see it as a way to understand what is going on from an environmental perspective, what the initiatives are. Basically the Grid looks at what standards should be and makes recommen
dations to various agencies and organizations about what would be the proper way to design a building and to utilize components that are environmentally responsible. Everything can’t be made out of bamboo and string, but with proper measure, most products can be made more environmentally friendly.
CNS: Clearly, R&D is important to your company. What key areas are you currently concentrating on?
Crenshaw: This is a key differentiator for CommScope especially with the Bell Labs legacy that we achieved with the purchase of the SYSTIMAX/ Avaya organization and Andrew’s longtime industry leadership in R&D. We have a substantial R&D focus and investment within CommScope.
There are key initiatives in the enterprise space that, come thick or thin, we will continue to fund. We think the areas around the intelligence infrastructure, where we can help customers manage their physical network, which is a chronic problem, is a key area. We also are investing in technology that makes our products easier to use, more intuitive and more cost-effective. In addition, data centres are going to be a hot space for the next three to five years as companies consolidate. We will also continue investing heavily in the optical space.
CNS: How do you see the fiber vs. copper debate playing out?
Crenshaw: I don’t really think it is a debate. We see them as complimentary products. There are applications where fiber makes a lot of sense. There are applications where fiber, either due to the prohibitive cost of the component electronics or the use of PoE devices, will not be effective.
We make all mediums and one thing we think distinguishes us is that we are media agnostic. People are going to be owning their infrastructure for telecommunications, data transport, video transport for a much longer period of time than they are going to own the electronics, typically.
We do not paint customers into one technology or the other.
Certainly fiber is going to be important, but we also think the high-performance copper-based 10G cables are going to be important as well.
CNS: What is CommScope doing to improve its sales in Canada?
Crenshaw: Since the purchase of Avaya’s Connectivity Solutions division in 2003 we have doubled our revenue in Canada and added staff. We provided that team with a lot more independence. Canada is a unique country with its own culture and personality and we cannot treat it as another state. We are also developing unique products and applications for this and other sophisticated, well-developed markets. We see Canada as a resource rich country with a lot of innovative capability and a bias to buy a high value product.
CNS: Finally, what differences, if any, do you see between the Canadian and U. S. markets?
Crenshaw: Probably the biggest difference to us is the dominance of Bell Canada. It bears a lot of influence. It is like having a large RBOC (Regional Bell Operating Company) in the U.S.
Aside from that, we find customers on the whole slightly more cautious and a little bit more adept at taking a second look or letting others try first when it comes to such advances as Category 6A and high-performance fiber. That said, once they become comfortable with the technology, they embrace it very well and do a very good job.
Corporate customers in Canada are good at making a value decision about the product they are about to buy.
In summary, it is an important market for us. CNS
“Canada is a unique country with its own culture and personality and we cannot treat it as another state.”