Ms. Beranek: Clearfield was reborn in mid-2007. About three years ago, the company discontinued its fragmented research and development history, and focused exclusively on providing the fiber-passive connectivity needs associated with the broadband service provider. By focusing our product development, and sales and marketing efforts on rural and underserved markets across the United States - and the wireless providers that work with them - we have provided access to these markets and are uniquely suited to their needs. This company was able to turn around a 20-year history, which frankly lacked focus, productivity and for that matter profitability, into an organization that was recognized by the American Business Association as a turnaround story of the year in 2008. At that point, our organization established a strategy that responded to and anticipated the needs of the fiber marketplace. We see the next couple of years as vital to continue building our foundational architecture so we can respond to the broadband service provider. This is a pre-growth strategy of sorts in this post-recession economic rebuilding environment.
TWST: How has the decline in the worldwide economy helped change or evolve your business at this point? How do you anticipate your market expanding?
Ms. Beranek: The current marketplace is fragmented. Ultimately, we envision a market where we are able to deliver fiber management to every home and every business in the United States, North America and the rest of the world. However, as a small and nimble organization, we don't dilute our efforts. So we have principally focused on the North American fiber-to-the-home market in the past. Now though, we're expanding beyond the North American market into new territories as well as to business-class services and the fiber-to-the-home architectures.
Historically, we watched multiple growth indicators in the pre-recession environment. The housing industry was in a huge growth bubble, and telephone and cable operators were searching for incremental revenue. The telecom boom of the late 1990s had miles of fiber that were circling the globe. But because none of the homes and businesses had that fiber connection directly into their fiber network, there was no means by which to respond to the growing bandwidth demands of consumers. So our product plan and company focus were developed to be able to respond to those market indicators. As a direct result, in 2008 and 2009 we did very well, with growth rates of 20% and 25%.
Last year's recessionary environment turned all of that somewhat upside-down. Nonetheless, over the course of the last six to nine months, we were able to maintain our revenue focus by expanding our reach. The housing industry and the greenfield market that we serve have essentially been put on hold. Like the rest of the businesses across America, telephone companies and cable TV companies made a conscious decision to hunker down and wait and see what the future held. The response, of course, has been the American Recovery and Reinvestment Act. The stimulus fund is an indicator and/or a resource for these companies to help them consider their next steps.
The American Recovery and Reinvestment Act will significantly impact the fiber-to-the-home marketplace in the next two to three years. The 7 billion earmarked for broadband deployment is for unserved or underserved markets. This is widely accepted as Clearfield's sweet spot. That's the good news. The bad news is that that program was announced at the beginning of of 2009 and as of this time - 15 or 16 months later - we have yet to see one dollar enter the marketplace. As a result, until the first round of stimulus funding is distributed, many of our customers, with whom we have been working closely, are still in wait-and-see mode. We are now expecting round-one funding in late summer or early fall. And round two, which is a subsequent 5 billion of that initial 7 billion, isn't expected any time soon. So while it's been a negative influence on us over the course of the last 18 months, we do see it as a significant growth opportunity for us in the next two to three years and beyond.
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