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NACT CONTINUES AHEAD TO EXPLOIT SWITCH NICHE

NEW YORK-With an initial public offering just completed and a move to larger facilities in Provo, Utah, imminent, NACT Telecommunications Inc. is moving ahead at full throttle to exploit its switch niche.

Formerly known as National Applied Computer Technologies, the company began operations in Orem, Utah’s version of the Silicon Valley, in 1982. Its mission was to capitalize on opportunities arising out of wireline telecommunications deregulation. Today, the deregulated wireless telecommunications industry represents another growth area for NACT. The company’s specialty is combining billing and switching, and offering the interoperability that is crucial to enabling services like prepaid cellular calling.

“We are focused on opportunities in wireless-in cellular, in wireless local loop,” said Lindsay Wallace, who left a position as national account manager for Sprint Corp. in 1993 to become chief executive officer of NACT.

When Wallace first joined the company, he said its sales were in the annual range of $3.5 million. More research than business oriented, the company operated in this fashion, he explained: “If a customer calls and bugs us enough, we’ll get around to selling them something.” For the calendar year 1996, NACT reported about $20 million in sales.

In a strategy the CEO termed one of “controlled aggression,” NACT will triple its office space and quintuple its manufacturing space when it moves this spring into new headquarters in Provo, three miles from its current location in Orem. “I’d describe us as a product design and switch assembly company,” Wallace said.

A year-and-a-half ago, NACT had two salespeople, both based in Utah. By the end of this year, the sales force will reach 16 people. In recent months, NACT sales offices have opened in Florida, Oregon and New York. Later this year, sales offices will open in Los Angeles, Chicago and Toronto. South America and Eastern Europe also will have NACT salespeople in the coming months.

Wallace parses the company’s competition into three categories: personal computer-based systems, open architecture systems and applications switch providers.

“PC-based systems generally are too small to meet [carriers’] needs, and when they have to expand, it costs just as much to add on as for the original, plus they don’t provide interoperability,” he said.

As a consequence, smaller carriers who go the PC-based switch route could, ironically, find themselves in the same predicament as huge carriers saddled with legacy systems whose component parts can’t communicate with each other, Wallace commented.

That isn’t to say, Wallace hastened to add, that NACT sees itself as competing with legacy switch manufacturers. “We don’t have an ego about this,” he said. “We work in conjunction with Nortel (Northern Telecom Ltd.), Siemens (AG), Ericsson (Inc.), Lucent Technologies Inc., DSC (Communications Corp.) for (their) customers who may own large switches and want to get into new applications rapidly. Our system manages and gives intelligence to the switch.”

Open architecture, as opposed to proprietary programming, is a hot topic lately in the telecommunications industry. But in Wallace’s view, there are significant pitfalls in this approach, as well.

“When you buy a switch matrix, all you get is the hardware. Now, you’ve got to find a billing system and you’ve got to get an applications person to write the software or buy the software from a third party,” he said. “If you have a problem, the carrier is in the middle, and startup carriers can’t afford this type of situation.”

Additionally, the cost of the software-in the range of $100,000 to $150,000-is about the same price as the switch itself.

“I’ve got 25 programmers who have been writing software for years, and when you buy the software from us, it costs about $5,000.”

NACT’s third type of competitor, applications switch providers, typically sell their own switches with add-on applications they provide but don’t manufacture themselves. “Generally, these don’t provide billing systems, and as a general rule, the switches aren’t scalable,” Wallace said.

In New Age terminology, one would say that NACT views itself as the Fourth Way. Wallace calls it, “a unique category-the complete turnkey solution.”

“We pride ourselves on the fact that you can get into business for under $100,000. Buy once from us and then grow,” Wallace said.

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