Headset Maker Hopeful That Invention Won’t Fall on Deaf Ears

When astronaut Neil Armstrong spoke from the moon nearly 20 years ago, most people were more interested in what he said than in how the sounds were sent to Earth.

But not everybody. A handful of NASA officials were concerned by the communications systems the astronauts were using. As space fans know, transmissions were full of snap, crackle, pops and hissing. The clunky radio headset built into Armstrong’s spacesuit was a recipe for a real headache.

Smallest 2-Way Headset

With that in mind a couple of years ago, the National Aeronautics and Space Administration asked inventor Elwood (Woody) Norris--father of the world’s smallest radio, an FM unit that fits snugly into a listener’s ear--to design something sleek. A month later, he returned with plans for the world’s smallest two-way headset.

Norris had stuffed a microphone and a receiver into an earpiece and crammed it with electronics so a user could transmit and receive at the same time. To send, the microphone senses bone vibrations, a technology called bone ambiance. Consequently, no external microphone is needed. All and all, the unit was smaller than a thimble.

The design looked promising, but disaster struck. When the space shuttle Challenger exploded, NASA’s attention turned elsewhere. Norris was left with an elegant piece of technology and nowhere to use it.

Enter Nadim Khalaf, a Kuwaiti-born La Jolla stockbroker looking for opportunities. Where Norris saw space-age technology, Khalaf saw commercial possibilities--a hands-free telephone headset, the chance to turn any phone into a speaker phone without users sounding as if they were standing in a wind tunnel.

Through two brokerage houses in British Columbia, Khalaf raised several hundred thousand dollars for a company to pay for further research and development into the technology. He convinced private investors to pony up another couple of hundred thousand dollars--tapping old friends from Kuwait and Dallas, where he once ran an auto showroom after graduating with a degree in finance from the University of Texas. Finally, he arranged an initial public offering for a company now called Compass Universal, which holds worldwide marketing rights to the technology and has its headquarters in La Jolla.

NASA Technology Adapted

His first product is the NASA technology refitted to use on regular telephones. It is called Teleset.

Anybody who has seen late-night television’s hard-sell commercials in which “the operators are standing by for your order” knows what telephone headsets usually look like. According to industry observers, units like that account for about $100 million in revenue annually.

Plantronics, a Santa Cruz-based manufacturer, is the IBM of headsets and has about 70% of the market.

Most headsets are sold for commercial purposes such as regional Bell operating systems, airline and hotel reservation centers or direct-marketing companies. They have not really caught on yet with consumers or executives.

According to Jim Dulgar, who headed consumer marketing at Plantronics and now is the national sales manager at Compass, Plantronics sold only about $3.5 million worth of telephone headsets to consumers last year.

Alan Davis, director of marketing at Plantronics, said, “We think that the market potential is enormous. But, right now, sales into that market are only about $5 million. The channels of distribution are not well established.”

Khalaf has set out to change that. With his initial public-offering funds in hand, he bought a booth at last June’s Consumer Electronics Show, the semiannual bazaar of next year’s hottest electronic gizmos.

There in Chicago, he was able to lure Dulgar from Plantronics and set up a national network of manufacturers’ representatives.

And he made an impression on the industry.

Some Consumer Interest

“We have been in business for 35 years,” said Trink Schurian, director of marketing at Jack Carter Associates, the manufacturer’s rep responsible for California, Nevada and Arizona, “and this product has had the highest number of consumer calls that we have ever had. The interest level is amazing.”

Retailers have begun to sign on.

“We generally carry a lot of new products,” said Farhad Morshed, vice president of Futuretronics, a 16-store chain filled with advanced technology gadgets. “This is a new design and concept. There is nothing like it on the market.”

Morshed plans to test the Teleset at Futuretronics stores in Horton Plaza, the Westside Pavilion, the Glendale Galleria and elsewhere. But he declines to speculate how well Teleset will sell.

“Unless there is heavy advertisements, it is hard to relay the concept,” he complained. “It really doesn’t show well, but people who want it will break a leg to get it.”

Teleset will carry a suggested retail price of about $100.

Schurian, whose company represents the sizzling Nintendo video game system among others, is not quite as cautious.

“This is truly an exciting product. The key is, does it work?”

“It does,” she added.

But does it?

Both Davis of Plantronics and Michael Chapman, marketing manager at GN Netcom, another headset manufacturer, openly questioned whether Teleset would work with a broad range of telephones.

Although, to most people, a telephone is a telephone, the way a headset is connected to the base unit varies greatly from manufacturer to manufacturer. For example, some have carbon-based mouthpieces; some have electronic mouthpieces. Many are wired differently.

Cost-Effectiveness Questioned

“Compass may make the claim that it will work on any system, but nobody has come up with a cost-effective way to do that,” Chapman said.

Compass’ Dulgar counters with a list of at least 75 telephone manufacturers that have been tested with Teleset. The unit works on every one, he said.

“We have 38 different whiz-bangers to take care of all the products.”

The Teleset headset works extremely well on the telephones they use for demonstration purposes, sounding as good, if not better, than conventional headsets.

Still, said Plantronics Davis, “We have a 43-page, single-spaced document with all the current telephone systems we know about. We are watching Compass closely, but it remains to be seen if they can deliver what they have promised.”

That test is coming. Compass began shipping the Teleset this fall. Besides Futuretronics, Macy’s of Northern California, a handful of upscale catalogues, several telephone-equipment distributors and the Marta buying cooperative (which includes 3-D Photo and Appliance and Cousins Furniture in San Diego) have agreed to carry the product.

Major Success Predicted

Not surprisingly, Khalaf is confident that the product will pass with flying colors. He expects to gross $5 million to $8 million in the next 18 months and to be generating $15 million within two years.

And, with the bravado of a true entrepreneur, his five-year goal is to have Compass counted among the Fortune 500. Not too bad for a company that now has around half a dozen employees.

But Khalaf is not counting on Teleset alone to take Compass that far. Norris is busy in his lab, and, over the next 12 months, Khalaf plans to introduce a headset aimed at the commercial market.