Survivor Remains Fast And Agile
The Age
Tuesday September 19, 2006
Garry Barker finds a veteran Australian IT company that just keeps growing.
TECHNOLOGY is a tough business. Operating as a supplier of broadband hardware in Australia can be a financial and technological adventure as local companies reach for scale, deal with foreign competition and try to get a handle on an industry struggling with political and regulatory an uncertainties.Netcomm, the largest Australian provider of broadband hardware, increased its revenue by 7.4 per cent in the financial year to June 30 to $22.4 million, but posted a loss of $1.2 million.Netcomm's ADSL2+ hardware is capable of handling up to 25 megabits per second. "The hardware we ship to consumers today runs at 256 kilobits per second or 512kbps, is capable of much more, but is being throttled by the carriers," says Netcomm managing director David Stewart. Australia lags behind the rest of the developed world in broadband speeds and takeup, although according to the latest report from the Australian Competition and Consumer Commission's Ed Willett, takeup is improving."At June 30 there were 3,518,100 broadband services connected across Australia," Mr Willett says. "This represents an increase of more than 1 million, or 67 per cent, over the previous 12 months. But percentage growth of broadband takeup had declined in absolute terms, to about 11 per cent for the June quarter, compared with 14 per cent in the March 2006 quarter."For Mr Stewart, the rise of voice over internet protocol (VoIP) is offering opportunities, particularly in small to medium (SME) businesses seeking to trim communications costs. "We can now talk about VoIP to the SME sector and they don't get quite so scared," he says. Attitudes to internet connectivity are also rapidly changing, says Steve Norris, Netcomm's channel manager. "Initially they saw it as a cost. Today, with the introduction of VoIP, all of a sudden the internet looks like a cost saving."No longer is it a matter of justifying expenditure. It is a matter of 'if I spend this much money, how much can I save on communications costs'," Mr Norris says.Netcomm now concentrates on DSL modems. "We made cable modems a while ago but Motorola now has that market pretty much to itself with Telstra and Optus," Mr Stewart says. "Our first ADSL modems came out in 1999; I think we sold a total of 500 units in that entire year. We have moved to ADSL1 and then ADSL2 and 2+ and as more broadband services are provided we will see users with ADSL1 upgrading to 2+."Providers wholesaling off Telstra will have to wait until it decides what to do," he says.Most of the Telstra's main exchanges are now ADSL2+ ready, but the telco so far has not implemented the technology, presumably while it continues its battle with the ACCC over the regulatory regime imposed on it.Netcomm is now 23 years old, one of the oldest surviving Australian IT companies, starting with production of audio couplers and then moving to 300 baud, 1200 baud and up to the dial-up limit of 56k. "We had this wave of growth because literally every 12 months there was new technology that our very loyal group of customers eagerly adopted as it came out," Mr Stewart says. "That stopped when we got to 56k in 1996. We then had a period of rationalisation and a lot of companies went out of business." Netcomm is the sole remaining survivor of those heady days of early internet adoption. Banksia, Mr Stewart's company, acquired several companies, including Dataplex. It merged with Netcomm and bought Spirit and is still growing by acquisition; most recently, in 2006, Dynalink New Zealand and Askey Australia."This has been a transformational year for Netcomm," Mr Stewart said in his recent report to the Australian Stock Exchange. The company's principal target is now small to medium businesses. Investment to "reposition the company to compete with higher value, higher margin technologies", to meet the demands of the SME sector, along with the cost of acquisitions had resulted in the loss reported to the ASX. The outlook now was positive, he said.Asked why Netcomm has survived and is now looking for growth in Australia and overseas, Mr Stewart responds with a laugh: "Perhaps because I am tough-arsed. We try to stay abreast of technology, we run the company tightly and we watch trends."
© 2006 The Age