the westell way

“We’ve been evolving a strategy as we think we were able to,” says Cullens, who took over as president and CEO of Westell in July of 2001 to repair the sinking ship. “We’ve kept a ton of discipline. We’re not going to go chasing butterflies.”

Like so many communications companies in recent years, Westell has ridden a rollercoaster of highs and lows. Westell did its IPO in 1995; experienced high times; “imploded” after losing a key DSL contract from SBC Communications Inc.; and then had a management shake-up, Cullens says. While Westell didn’t file Chapter 11, “we flirted with it,” he says. To avoid that fate and move to profitability, Cullens was brought in to lead a major restructuring — hiring on Gordon Reichard Jr. as vice president of marketing, among others.

As was the case at most companies during the technology bubble, revenue growth and stock appreciation had been everything at Westell, “so we really had to focus the company on profitability,” says Cullens, who took Westell from a company with more than $100 million in debt to one with nearly $30 million in cash and no debt. The company is not even drawing down its $30 million bank line, he notes. Westell’s total revenue for fiscal year 2005 increased 15 percent to $270.3 million from $235.7 million for fiscal 2004. “We accomplished our fiscal 2005 goals of growth in revenue, increased profitability and product diversification,” Cullens says.

There’s a chart on the wall at Westell’s Aurora, Ill., headquarters with stair steps that read: profitability, sustained profitability, growth and breakout. “We’re [now] at sustained growth — looking for breakout,” Cullens says, adding that an earlier version of the same chart had started with the word “survive.”

Prior to joining Westell, Van Cullens was president and CEO of Harris Corp., a $1.7 billion public company headquartered in Melbourne, Fla. He also has worked in various executive positions with Siemens ICN, Siemens Stromberg-Carlson and GPT Stromberg-Carlson; and held management positions with GTE Telephone Operations. Cullens is also chairman of the Telecommunications Industry Association (TIA) board of directors.

To push Westell onto that final stair, the company last year alone introduced 30 products across its three business lines. The company’s product lines include network service access (NSA) gear like enclosures, mountings, special service transmission products and TDM to IP transition solutions; ConferencePlus Inc. audio, video and Web conferencing services; and customer networking equipment such as gateways, modems, routers, VoIP and video products.

Westell’s legacy NSA business still accounts for about 17 percent of Westell’s overall revenue, says Cullens, and the company’s ConferencePlus subsidiary — for which the company would entertain an offer if a good one presented itself — generates nice margins. But it’s the CPE part of Westell that is the central player here.

“For a while, on the DSL side, we were a one-trick pony — we just had the DSL modem,” says Cullens. Now, however, Westell offers a collection of home networking gear including DSL, Wi-Fi, voice and video capabilities. Westell’s breakout will be tied intimately to how it fares in supplying incumbent telcos — and possibly other service providers — with such home networking gear.

That will be no easy task, considering everyone from 2Wire Inc. (which is supplying the home gateway to SBC for its integrated DSL/DBS service) to Microsoft Corp. (which is using its Xbox gaming console as a Trojan horse to gain control of in-home networking) is vying for dominance in the home networking space. Other Westell competitors include ActionTec Electronics Inc., D-Link Corp., NETGEAR, Netopia Inc. and UTStarcom Inc. This is a hot new area in networking, according to Parks Associates, which forecasts the number of broadband households with a residential gateway will reach 69 percent by 2009.

But Cullens believes Westell is well-positioned to become a leader in home networking given its close relationship with the ILECs and understanding of their requirements, as well as its in-house, domestic manufacturing operations.

“We need to iPod this thing,” says Cullens, referring to the need to simplify use of home network appliances and all the piece parts they work with. “We’re trying to eliminate the complexity in maintenance and support,” he adds, noting the convergence of voice, video and data services multiplies the number of customer care demands on telcos offering the triple play.

Westell is well-positioned to help the telcos navigate those ease-of-use and ease-of-maintenance barriers, he says, because as a traditional telecom vendor, the company is intimately familiar with telco help desk issues, labor union concerns, truck roll costs and the like.

The UltraLine II

Perhaps an even bigger differentiator for Westell is the fact that, in these days of rampant outsourcing, its manufacturing is done right here in the United States — at the home office in Aurora. That allows the company to turn on a dime and help its customers meet the demands of the new “lean operator.”

If a customer needs Westell to make a change to a product — or a bad component needs to be changed — the vendor can reengineer and reset its product line quickly, and within 48 hours of that reset can have product in a customer’s box, Cullens says. That’s far more quickly than a company with manufacturing abroad could offer, he adds, since Westell is so much geographically closer to its customers. “In 30 days our customer wanted MoCA, and in 30 days we delivered,” Reichard adds, referring to a recent request related to Westell’s UltraLine II wireless gateway.

And because Westell owns the manufacturing piece “it also allows us to keep our customers’ inventory lean,” Cullens adds.

Apparently, customers understand these benefits, given Westell has shipped more than 10 million units of CPE, which includes more than 1.5 million units of its VersaLink Gateway, on which BellSouth and Verizon have standardized.

The TriLink Gateway

In fact, Westell added VersaPort, which is the ability to add fiber on any port, to the VersaLink Gateway specifically for Verizon. And in June, BellSouth selected VersaLink for its FastAccess Broadband DSL subscribers. VersaLink integrates a broadband DSL modem with a remotely manageable QoS-aware multiport router with 802.11g wireless networking.

In other news from Westell this summer, the company announced its UltraLine II, a family of home networking routers for delivering IPTV and video to residential customers. Each UltraLine II includes an intelligent Ethernet switch and a digital coaxial connector so the gateway can be connected directly to existing in-home coaxial cable and broadband-enabled devices such as IP video set-top boxes or digital recorders. This line of products, which Westell demonstrated for the first time at SUPERCOMM in June, includes the UltraLine IIe, which is an Ethernet WAN version for direct fiber connections; the UltraLine IIb, a bonded ADSL WAN product; and the UltraLine IIv VDSL WAN option. Reichard adds that a customer request also has prompted Westell to consider the idea of creating a version of UltraLine II that could hang on the outside of the house for easier access by telco technicians, noting Westell already has expertise in outdoor enclosures.

Westell now is responding to RFPs and has several service providers lab-testing the UltraLine II. Westell is also in carrier labs with its TriLink Gateway, a VoIP product with two SIP ports and integrated 802.11g. “The only hook now is the E911 ruling,” says Cullens, commenting that in light of the FCC’s recent decision requiring VoIP providers to offer E911 parity with the PSTN, Westell will have to modify the TriLink.

But the pièce de résistance at Westell these days is a multifunction home networking device it is manufacturing for Verizon called Verizon One. Verizon One includes a 5.8GHz cordless phone with speakerphone; and a 802.11g wireless hub with ADSL2+ modem. It runs Microsoft CE as a base platform, and delivers the touchscreen features described below via a Verizon proprietary software platform called iobi.

Verizon approached Westell with the design concept and technical specifications for the box, and the two companies collaborated — using their own technologies and those of Westell subcontractors CCT Telecom Holdings Ltd., DSP Group Inc., Mistral Software Inc. and Mitel Networks Corp. — to turn that concept into an actual product.

A touchscreen on the unit allows individuals to access customized information such as weather, stock quotes, sports scores and the like with a single tap. Verizon One also offers visual call logs; one-touch dialing from Verizon SuperPages search results (including access to maps and driving directions); an on-screen memo pad; a personal calendar; address book entry directly from call logs and online directory assistance; and the ability for customers to customize content based on their interests, and tailor the touchscreen display with their personal photos. “The whole idea is to make this thing very point and click,” says Reichard.

“This is a device that integrates several technologies together on a single desktop. It simplifies DSL installation and home network setup, while eliminating the clutter of multiple devices and wires,” says Verizon spokeswoman Sharon Beadle.

Verizon One can be ordered by new and existing Verizon Online DSL customers at more than 60 Verizon Plus Stores across 15 states. Verizon plans to expand its Verizon One offering in additional markets later this year.

New Verizon Online DSL customers who place an order for Verizon One will not need the modem that usually is included with Verizon’s standard DSL offer. Instead, customers who order Verizon One by Aug. 31, 2005, will receive an immediate $50 discount off the $199.95 retail price. Customers also are required to pay for shipping.

Although Westell has intentions of offering a similar version of the Verizon One solution — called the Media Gateway — Cullen says that, for now, Westell is working exclusively with Verizon on this effort. Again, the vendor is moving cautiously.

AT THE SAME TIME WESTELL IS FOLLOWING ITS TARGETED STRATEGY OF ROLLING out new products for RBOCs and IOCs in North America, the company in the last few months has been testing the waters for its products in the European markets.

But pricing and regulations in Europe are tough, says Cullens, so Westell is considering carefully whether an OEM strategy in Europe would be preferable for at least some of its products.

For the higher-end products like Westell’s media gateway, however, Cullens says the company is registering good interest.

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