High Speed Is of the Essence for Accelerated Networks
More than just the name Accelerated Networks connotes speed. Virtually every step the company takes happens at a faster pace, be it the attempts to carve its market niche or the rapid fluctuations in its stock price.
The Moorpark-based company makes products that bundle the various telephone services--voice, fax, Internet and other data services--to be sent over a single broadband network.
At a time when voice-only telephone lines are going the way of rotary phones, most companies still have separate lines for the various services. But with the growth of e-commerce leading some analysts to anticipate a 300-fold growth in Internet use in the next five years, companies will need upgraded communications services to help them cope with the changes.
Accelerated hopes to fill that need.
“Everybody needs high-speed Internet access to be competitive in today’s economy,” said Suresh
Nihalani, the company’s founder, president and chief executive.
This, however, is not a conclusion Nihalani and Accelerated have reached alone. Many of the world’s largest telecommunications companies--including Alcatel, Cisco Systems, Lucent Technologies, Nokia and Nortel Networks--are working on the same thing.
And, Accelerated’s filings with the Securities and Exchange Commission indicate, those competitors “are able to devote greater resources to the development, promotion, sale and support of their products” than Accelerated.
So, if it is to succeed, Accelerated has a need for speed.
Currently, its customers receive an integrated-access device in a box that is plugged in at business offices. A single line runs from those offices to the telephone carrier’s office.
Accelerated’s second product, called a multi-service access platform, is stationed at the telephone carrier’s office and takes the information from the various phone functions and sends it to the appropriate locations. That, in effect, allows all telecommunications services to occupy the same telephone line.
Add to those a third device called a “voice gateway,” which resides at the telephone carrier’s regional switching center, where voice traffic is sent on a path designated for either local or long-distance calls.
“They have been a forerunner in providing integrated-access devices,” said Alan Russell, spokesman for CTC Communications, a communications provider near Boston that has been using Accelerated products for more than a year. “They’ve helped to evolve this next-generation architecture.”
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Old-generation networks that have been operated by regional Bells, Russell said, will have to change. Those telephone lines have to be removed from the old circuit-switching technology in order to carry local-service phone lines across next-generation networks.
“Everyone is evolving their networks,” Russell said. “Some will be ahead and some will be behind.”
Nihalani, 48, clearly wants Accelerated to be one of the companies that speeds this evolution, as well as one that is still standing when the industry shakes out. To make that happen, he said, he has spent much of his company’s four-year history raising money to help it compete.
From March 1997 to May 1999, Accelerated generated $88 million through four rounds of funding. Before going public, the most recent large infusion was $10 million from MCI Worldcom Investments.
“We brought in these key investors,” Nihalani said. “They brought more than just money--they brought strategic value.”
In June, Accelerated went public with its stock listed at $15 a share. At the end of its first day of trading, the price more than tripled to $47.88. At one point in July, the stock price reached $67.50 a share. By Dec. 11, however, the stock had fallen to $6.81, as the entire telecommunications sector was brutalized by negative earnings reports and a general uncertainty about the industry’s growth prospects.
For the third quarter that ended Sept. 30, Accelerated reported a 300% increase in revenues of $11.6 million, compared with revenues of $2.9 million in the same quarter of 1999. But the company reported that deferred stock compensation resulted in a net loss of $9 million.
The company’s customer base includes competitive local phone companies, regional Bell operating companies, and foreign telephone companies.
“Customer response is good,” said CTC’s Russell. His customers, which include medium and large businesses, are realizing direct savings of 10% to 40%, he said. They also have a reduction in the “soft costs” associated with dealing with several different carriers, he said.
At Accelerated, Nihalani said, “either you can buy everything from us and build a seamless network or you can mix and match products from other vendors and the network system will operate.”
Other companies provide products that solve part of the telecom puzzle--either the integrated-access devices or multi-service access platforms. But only Accelerated has developed a complete solution for both the digital subscriber line and T-1 telephone lines, company officials said.
“Accelerated Networks is a small company and has a good grasp of what end-users need to have,” said Ralph Widmar of Network Intelligence, a consulting firm in Monterey that specializes in telecommunications and regulations. “They’ve been keeping their eye on the future, and they’re coming out with some good products.”
But, he said, “you have to be realistic about the fact that Accelerated is out there hacking out roads in the jungle with machetes, and it won’t be long before lots more of the bigger vehicles start coming through. They’ve done a lot of preliminary work. It would be foolish to think that some of the large companies are not going to take advantage of the pathways available now.”
Christine Heckart, president of TeleChoice, a strategic consulting firm for the telecommunications industry, said Accelerated has “to go from being a one-product-line company to being a real business with many product lines and many markets.”
The company, she said, is also challenged to drive revenue growth when Wall Street expectations are exceptionally high.
But Nihalani said he’s not fooling himself about the competition. “This market is going to be huge,” he said. “So we will naturally see some other players come into the market.”
To keep up, Nihalani said, the company has opened a sales office in Brussels and research-and-development centers in Texas and India.
That allows the Bombay-born Nihalani to use an ethnic connection and tap “the best technical minds out there,” he said. “We have gone to India because there is a very large pool of engineers.”
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Nearly 25% of Accelerated’s staff is from India, he said.
Nihalani attended the Institute of Indian Technology, where he majored in electronics. He earned his master’s degree from the Florida Institute of Technology in Melbourne, Fla. In 1979, while working on his doctorate degree at UCLA, Nihalani worked full time at Litton Data Systems in Van Nuys as a senior designer of digital communication controllers for the defense industry.
Eventually, he left the doctoral program to focus on the business world.
In 1982, he joined MICOM as a hardware engineering manager and later became vice president of product development. To invest in new potential markets, Nihalani and his associate Martin Shum left and started ACT Networks in Camarillo in 1987.
Nine years later, Nihalani founded Accelerated Networks in the belief that the Telecommunications Reform Act of 1996 would alter the way telephone companies could deliver services to their customers.
Along with coping with larger competitors, Nihalani said, his biggest problem is managing growth. In the last year, Accelerated has gone from 175 to 255 employees. It’s looking to merge its facility in Moorpark with two in Simi Valley into a single, 100,000-square-foot location.
“We anticipate pretty hefty growth,” said Nihalani. “This transition from the public telephone network being dial-tone-centric to becoming dial-tone-and-data-centric has just begun.”
