Profile: No Longer a Newcomer

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  Space News Business

Profile: No Longer a Newcomer

By PETER B. de SELDING
Space News Staff Writer
posted: 12 March 2008
04:01 pm ET






Mary Cotton

Chief Executive Officer, iDirect Technologies Inc.

Satellite broadband network provider iDirect Technologies Inc. went from unknown to unavoidable in the space of just a few years, muscling itself a place alongside veteran suppliers Hughes, Gilat and ViaSat.

By 2006, Herndon, Va.-based iDirect had secured a 10 percent share of the global market for so-called enterprise Very Small Aperture Terminal (VSAT) networks – which link corporate field offices, retail chains and other business users – according to the annual survey by Comsys, the market research firm.

Unlike some of its competitors, iDirect has not entered the consumer market. Nor has it expanded much into services – at least not yet.

For Mary Cotton, who became iDirect’s chief executive in September 2007, the question now is how to build on the fast growth of the past five years at a time when the company’s old competitors are in robust health and new ones, such as Newtec of Belgium, are making inroads.

The answer appears to be to target U.S. government classified and other defense work, and to take advantage of the fast growth in VSAT applications in Africa, the Middle East and Asia.

Cotton said iDirect prefers to enter new markets with partners, which currently total more than 300 network operators, including satellite operators, that integrate iDirect’s Intelligent Platform product line into broader service offerings around the world. A recent example is iDirect’s agreement with maritime satellite-antenna systems provider Sea Tel and satellite-fleet operator Intelsat to provide government and commercial maritime customers with satellite connectivity as the vessels move from region to region.

Aeronautical satellite communications also is on the horizon for iDirect as the VSAT business goes mobile.

Cotton spoke with Space News staff writer Peter B. de Selding while she was attending the Cabsat trade show in Dubai.

You have been taking market share from competitors, and the overall market also is growing. What is your outlook for the near term?

The market is very good. We see continued, healthy double-digit growth in our revenue, which was around $138 million in 2007. We also are growing our work force. We are about 300 employees now and we expect to increase in size by close to 15 percent per year in the next couple of years.

What is your revenue split by region and type of customer?

About one-third of our business is with the U.S. federal government, including both the Defense Department and other government agencies. The remainder is almost all commercial, with 30 percent coming from Europe, the Middle East and Africa, 27 percent from North and South America and 10 percent from Asia.

You are mainly a producer of hubs and terminals for professional applications. Is the services end of your business also growing?

Yes, but we remain focused on the hardware and software side. We don’t do a lot of professional services. We do mainly one-year contracts with options for renewals in them, and we do technology support for customers. But services accounts for only about $20 million of our annual revenue.

In late 2007 you created a stand-alone subsidiary, iDirect Government Technologies Inc., to handle U.S. government work. Is that to adapt your product line or to adapt your sales force to government, especially military, customers?

It’s a little of both, but mainly it is to establish the security clearances so we can be part of classified programs and take advantage of the NRE [non-recurring engineering] contracts with government customers. It’s a logical step for a company like ours, which is foreign-owned.

The U.S. Defense Department is the world’s biggest buyer of satellite systems and services, but do you see growth for your company among military customers outside the United States?

Absolutely, particularly for applications like coms [communications] on the move. We think we’ve just scratched the surface of this market outside the United States and that it will be a good growth area for us.

Unlike your principal competitors – Hughes Network Systems and ViaSat of the United States, Gilat of Israel and Newtec of Belgium – you are part of a much larger corporate entity, Singapore Technologies. Does this limit your freedom of movement?

We are a subsidiary of VT Systems Inc., which is a subsidiary of Singapore Technologies. Being part of a larger corporation comes with reporting requirements, of course, but it also gives us access to capital. We haven’t seen any constraints due to our position inside a much larger entity.

Ka-band satellite services are now catching on for both commercial and military applications in the United States, with commercial and military projects also announced in Europe and the Middle East. Does that change anything for iDirect

We don’t see that as presenting any kinds of issues for us. 

The annual Comsys VSAT Report concluded that iDirect has a 10 percent share of the market for providing terminals and hubs to enterprise customers. Is this from taking customers from competitors, or from winning more new business than they do?

It’s a combination. If you look at 2007, there are some contracts we won with our competitors’ customers and then we exist side by side with their networks. In these cases the customers’ accounts will keep the former supplier and us.

What differentiates your products from the competition?

Part of it is scalability. We can grow with the customer, starting small, and then they add capabilities. Our competitors have taken different tacks as they have evolved. There has been some vertical integration, as we’ve seen with ViaSat’s decision to purchase its own satellite, and some of them are focusing now on the consumer market.

Newtec
is up and coming, and we see them more and more. But clearly Hughes, Gilat and ViaSat have been in the market a lot longer than we have, and iDirect was the first new entrant in years. We have been focused on the applications side, and on IP-based solutions from the start. We are differentiating ourselves partly by staying focused on the vertical markets.

Is consolidation likely among the terminal and hub suppliers?

From a customer perspective, I think the preference is for as many healthy competitors as possible. For example, the fact that Gilat apparently will remain independent, and not be consolidated into a competitor’s business, is not a bad thing for the market if you’re a customer. It would have been a rocky transition, and customers are served best by vigorous competition, with everyone pushing the technology. 

A rising tide lifts all the boats. But if the market turns downward, can the current competitive landscape remain intact?

A lot depends on how you define the competition in the coming years. The satellite piece is fairly small and does not exist in a vacuum. We are seeing moves by the big telcos, by [computer networking giant] Cisco and others that may make a challenge.

You are expanding your operations in the Middle East, Africa, Asia and South America. Is market access an issue from a regulatory standpoint?

That has not been a real restriction for us. In many of our contracts we have local partners, and in some areas we are a customer to a U.S. company setting up a network for its operations in a given country.