NEW YORK-Given “some ridiculous pricing in reseller channels,” Metrocall Inc. “dramatically altered the distribution strategy” this spring, and results started to show by the end of the second quarter, said William Collins III, company president.
At $4 per pager, (reseller) net revenues are excellent, at $3, very good. At $2, you have to ask if this is a contribution toward accomplishing a 30 percent margin,” Collins said, while announcing second-quarter results. “I won’t identify the companies doing this, but I believe they will change their distribution strategy once they know the industry.”
Vincent Kelly, chief financial officer, said the goal is to reduce the reseller channel to 40 percent of additions. By June, reseller additions comprised about 44 percent for that month. Besides dissatisfaction with reseller margins, Kelly added Metrocall “doesn’t want someone who will turn around and compete against you.”
Metrocall Inc. reported net revenues of $32 million for the period, ended June 30, compared with net revenues of $27.6 million for the same quarter the previous year.
Net loss fell to $11 million, or 75 cents per share, for the three months, compared with a loss of $2 million, or 19 cents per share, for the three months ended June 30, 1995.
Metrocall said it added 100,099 subscribers during the second quarter, increasing its subscriber base to 1.1 million. The number of additions in a quarter broke a company record, but Kelly said he anticipated somewhat less than 100,000 additions for the third quarter.
Operating cash flow for the second quarter totaled $5.5 million, slightly below projections. “Expanding our service network so we’re not just relying on one kind of distribution results in lower cash flow, but will grow recurring service revenue,” Kelly said.
Collins also emphasized that Metrocall doesn’t feel that broadband personal communications services messaging products pose a threat to paging growth. “The issue of PCS cannibalizing paging is like the issue of cellular cannibalizing paging. It’s a non-issue,” he said. “Paging is a complementary service with wide-area coverage that’s more cost-effective and has 40 times the battery life.”
