John Higginbotham

Chief Executive Officer, Integral Systems

In his long career as a space entrepreneur and venture capitalist John Higginbotham has stepped into the chief executive officer’s (CEO) chair at several companies, but usually on a temporary basis. It will be different at Integral Systems where he has a three-year contract and a mandate to take a profitable company and establish a strong pattern of growth.

In an interview with Space News staff writer Turner Brinton and editor Lon Rains, Higginbotham said he took up the challenge of running the satellite ground systems and solutions provider because he believes the company is undervalued and has great capabilities that give it solid growth prospects.

Higginbotham is a longtime fixture in the space industry. In 1981 he co-founded International Technology Underwriters (now known as AXA Insurance). A decade later he founded SpaceVest Capital (since renamed Redshift Ventures), a venture capital fund that made investments in companies like Analytical Graphics, ProtoStar and Imaginova, the parent company of Space News. According to a filing with the U.S. Securities and Exchange Commission, he signed a three-year contract with Integral July 9 providing a base salary of $360,000, a signing bonus of $75,000, an incentive package potentialy worth up to $540,000 a year and options to purchase 275,000 shares of the company’s common stock with additional options available each year.

He is bullish on Integral’s prospects even in the face of an economic downturn and uncertain government space budgets. In fact, Higginbotham believes that tighter government budgets will work to Integral’s advantage because they will give NASA, the Defense Department and other U.S. government agencies added incentive to take advantage of the off-the-shelf commercial products that are Integral’s specialty.

He also believes the healthy mix of commercial and government work Integral has maintained for 26 years will work to the company’s advantage. In the 1980s and 1990s, many
aerospace companies that had a balance of commercial and government customers began to consolidate and focus on one market or the other. Higginbotham believes companies that moved to solely government business lost the lean and mean edge fostered in the commercial environment, while those that moved to solely commercial business lost a prime engine for research and development. This, he says, hurt the industry and ultimately contributed to the
United States
falling behind
in many fields of technology.

Integral was for sale two years ago but the board thought the market undervalued the company and stopped looking for a buyer. Is the company for sale again?

No it’s not. We have a core capability that’s ready to grow. We had a very good financial year and delivered some very important capabilities to some very important programs over the past three or four quarters. We have a reconciled organization thanks to the efforts of [interim CEO Alan Baldwin]. So we feel like we’ve got some pieces really starting to hum.

We’re addressing the cost structure of the industry successfully to bring more productivity and deliver more capabilities for less money. It’s more of a comprehensive understanding of how we can bring commercial practices combined with good program management and good system development and systems integration skills to deliver a better value proposition to our customers.

Will you be looking at acquisitions?

We will always look for good, creative acquisitions that will enhance our capabilities. I don’t want to overplay that. We believe we have the core critical mass to do a lot of growth internally. Clearly, when we find a situation that is mutually beneficial and can enhance both our market position and capabilities as a company, we will obviously entertain that. But we’ll do it in a risk-mitigated, balanced, thoughtful way.

Why are you confident in this company’s ability to grow?

There are some mega-trends in the defense, aerospace and space industries that I think are very favorable for our growth potential. There is an absolutely critical need for delivering capabilities for the warfighter on time and under budget. We just need to do a better job in this industry of getting capabilities out in the field that people can rely on.

This company’s legacy came from commercial solutions for advanced networks for government, commercial and industrial customers. That approach is going to be critical in a time of constrained budgets.

telecommunications numbers are disappointing compared to the global market, looking at things like teledensity and Internet connectivity. We’re not first in the world anymore. We may think we are, but we’re not. We’ve lost that pipeline for developing advanced capabilities.

Where do you see the satellite industry heading?

On a commercial front, the satellite industry needs to understand it’s not competing with itself. It’s competing with the rest of the telecommunications world. We as an industry need to move into the 21st century to be able to take advantage of outsourcing, take advantage of integrated solutions and be competitive in a network operations context across what is now a global industry.

This industry spends a lot of time looking at itself. We need to get out of that mode and start understanding where satellite communications and satellite operators fit into the wireless world, the wired world, advanced networks and integrated solutions. Integral is on the front end of that revolution.

What will be the contested domains between satellites and the rest of the telecommunications industry?

That’s a very big question. I think there are two areas that are going to emerge. The first is global integrated networks built around an all-digital environment. The reality is that most networks right now are hybrids of old analog capabilities and new types of digital networks. These are frankly very complex networks to try and integrate, with many dissimilar protocols and dissimilar capabilities that require a lot of translation and caching.

Components of the network, including terminals, backbone, processing and all the rest of it, are in varying stages of generational development. I think we’re now moving into an era where these components in the digital world must be integrated in different and more efficient ways going forward.

The satellite industry is going to see competition when the wireless and wired houses start to develop capabilities that are independent of the transport layer. In other words, it can work just as easily on a satellite as it can on a cell system or a wire network. The challenge for the satellite industry is becoming the network provider rather than just the transport layer provider.

The other area the industry is coming to grips with is mobility. The bottom line is, we live in a mobile world. Satellites still tend to have a fixed-site mentality. We’ve got to find a way to break through in the mobile services world to be able to compete in our regions and internationally if we want to continue to provide a transport capability that is valuable.

If we really want to take this industry mainstream, instead of being one-tenth of 1 percent of the global telecommunications environment – we need to be more like 5 percent or 10 percent. We have to come to grips with how we’re going to handle mobility. If we can’t find a way to compete and communicate with [a Blackberry] in a way that is seamless and competitive and adds value, we’re going to be missing the big ticket.

Are you confident mobile satellite services will soon be able to do that?

We are reaching the point of saturation as far as how many cell towers you can build in the world. And we still only have 50 percent or 60 percent coverage of the world’s population.

With all of that, it comes down to network operations. The more switching you have to do to make a phone call from here to Mumbai, the more complexity and loss of control you are introducing to your network. If we can find a way to handle true global mobile communications in a seamless way – and satellites can uniquely do that – we can start to enjoy in the mobile satellite services world some of the same attributes we enjoy in the direct broadcast services world.