CEO And President Interview: ADC Telecommunications, Inc.(ADCT) - Robert Switz
July 12, 2010 - The Wall Street Transcript has just published Wireless Communications and Telecom Equipment Report offering a timely review of the Telecommunications sector. This Special Report contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. Please find an excerpt below.
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Robert (Bob) Switz was named Chairman of ADC Telecommunications, Inc., in July 2008, and he has served as President and Chief Executive Officer of the company since August 2003. Mr. Switz has played an instrumental role in transforming ADC in recent years, developing and implementing strategies that secured the company's position as one of the leading global providers of fiber connectivity, and wireless coverage and capacity solutions for communications service providers. He led ADC to five straight years of revenue growth, improved profitability and increased cash flow from 2003 to 2008, and he has managed the company effectively through the global economic downturn over the past two years. Previously, Mr. Switz served ADC as Executive Vice President and Chief Financial Officer. He joined ADC as CFO in January 1994 and also served the company as Senior Vice President and Executive Vice President during his tenure. Throughout his ADC career, Mr. Switz has held leadership responsibilities for numerous critical functions, including strategic planning, business development, corporate technology, marketing communications, sales operations and information systems. As President of ADC's Broadband Access and Transport Group, he led the company's second largest operating group to revenues of $1 billion in fiscal year 2000.
TWST: Please give us a capsule summary of ADC Telecommunications, what the business is and what the organization looks like.
Mr. Switz: ADC (ADCT) is a leading global supplier of broadband communications network infrastructure products and related services to wireline, wireless and enterprise customers. We're celebrating our 75th anniversary this August, a remarkable milestone for a company in our industry. We have three business units: our Global Connectivity Solutions business unit, our Network Solutions business unit that's focused on wireless networks, and our Professional Services business that provides services mainly to U.S. carriers. Our corporate office is located in Minneapolis, Minn., and we have operations all over the globe. We also utilize our own shared-services center, which we run out of India, and we have our own manufacturing operations in each major region of the globe.
TWST: What historically has been the marketplace, and how has it evolved over the recent past? Who do you consider historically to be your clients, and how has that base changed, if at all?
Mr. Switz: They actually haven't changed much at all over the years. We have always been a supplier to communications service providers around the globe, whether they were PTTs, Tier 1 carriers, municipalities with their own networks, Tier 2/Tier 3 carriers, or MSOs, cable companies. Around 2005 we added an enterprise component to our business, and we now also serve the Fortune 2000 and other large public and private enterprises worldwide. So our customer base has essentially remained the same over time, with that one enterprise exception. Though I should add that it has certainly become much more global.
TWST: What are the dynamics in the competitive landscape - new entrants, ease of entry, barriers to competition? What differentiates ADC?
Mr. Switz: I would first say that the competitive environment is very challenging, mainly for a couple of reasons. One, the industry has been consolidating. Our customer base has been shrinking because they've been consolidating or acquiring one another. They also are spending less cap ex dollars in total, so the pie is clearly getting smaller on a global basis. And two, the shift in demand around the world regarding growth in the industry is primarily coming out of emerging markets. This globalization has also made the industry much more competitive than it was several years ago. In terms of ADC, one important element that makes us stand out competitively is incumbency. We have been around a long time; we have a lot of customers with many of our products in their networks, and they are very comfortable with the quality and service that they've received from ADC over the years. Another competitive strength is our global platform, which includes a manufacturing, sales and customer service presence in key markets around the world.
TWST: What were the priorities for the company 12-18 months ago, and how have you performed in that time frame?
Mr. Switz: About 18 months ago, the global economy was starting to go into a downturn. Fortunately, we recognized in advance that the downturn was coming and took action. Around November of 2008, we implemented major cost-reduction and restructuring initiatives, acknowledging that we were likely to experience significant volume declines in the post-2008 period. This very significant global restructuring program was geared toward two areas. One, based on the expectation that demand for many of our products would decline rapidly, we reduced our operational capacity around the globe, taking immediate cost out of the system. The second element was to begin implementing improved processes and procedures that would stand the test of time and create long-lasting efficiencies on an institutionalized basis. I believe our results in 2009 reflected the success of those initiatives. Despite the fact that our revenue declined by some 25%, our gross margins have held to within about a point or so of where they were prior to the downturn.
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