NetComm's great leap forward - into services

Stuart Corner
Friday, 23 November 2007 07:39

IT Industry - Deals

Faced with the increasing commoditisation of hardware, long established Australian comms equipment maker, NetComm (ASX: NTC) has unveiled a bold plan to move into services with the goal of having these account for the bulk of its revenue within three years. CEO, and founder, David Stewart, told the company's AGM that "In time, we see NetComm transforming itself from a telecommunications hardware company to a sophisticated mix of hardware, systems and services." He said the company would continue to develop "innovative hardware to meet the needs of customers looking for new 3G or NextG solutions," but would also "target new products and services in order to diversify our revenue stream and retain higher margins and earnings...In particular, we will focus on developing new services – services that generate valuable recurring, annuity revenue streams."

He added: "We are working to a two to three year plan...[that] involves undertaking a series of 'intelligent' synergistic transactions that will grow NetComm's diversity and build wealth. To contain risk, the first transactions will be relatively modest. However, subsequent transactions could ramp quickly in scale and value in line with the expected uplift in NetComm's share price over the life of the strategy."

A slide presented by Stewart to the meeting indicated that the company expects value added services to account for a significant but minority portion of revenues in 2008 and the majority by 2009-2010. Another slide listed possible services as being equipment rental, support, VoIP, Internet connections, managed services and VPNs for the consumer, SOHO and vertical markets; with the addition later on of intelligent home and energy management services.

The company currently provides a range of 3G/Next G access devices and the slide indicated that WiMAX products would be added. However, in his address, chairman Terry Winters observed that "Exciting technologies such as WiMAX may actually end up being killed at birth by mobile technologies like Next G and 3G."