NEW YORK-U.S. Digital Communications Inc., Calabasas, Calif., is a classic example in action of the old saying, “when the going gets tough, the tough get going.”
After seven years of bad luck trying to develop and market Web TV under the name of VisCorp, the company did an about-face early this year and is making an aggressive foray into satellite-based wireless communications.
Robert Wussler, chairman, announced Dec. 9 an agreement designating Skysite Communications Corp., a U.S. Digital subsidiary, as one of three Iridium distributors in North America. Today, there are just 11 Iridium distributors worldwide, he said.
By year-end, U.S. Digital hopes to announce its acquisition of “a little East Coast company we’ve unearthed that provides wireless Internet access at 90 times the standard (transmission speed of) 28.8 (baud),” Wussler said in a presentation to the New York Society of Security Analysts. “We are also having serious conversations with three terrestrial wireless carriers. Two look promising, and we expect announcements within 30 to 90 days.”
Wussler, former president of CBS and a co-founder of Turner Broadcasting’s CNN, joined the board of VisCorp about two years ago and became its chairman in March. VisCorp changed its name to U.S. Digital in October.
“I discovered many interesting aspects about this company, all hidden,” Wussler said. “Its Web TV product was good on technology, bad in marketing … so we started to do some due diligence, looking around for (other) opportunities.”
One of these is Skysite Communications Corp., North Hollywood, Calif., which U.S. Digital acquired in July in a tax-free reorganization. The purchase involved the transfer of 750,000 shares of unregistered, restricted VisCorp stock to Skysite shareholders for investment rather than resale, plus stock options to certain Skysite shareholders.
Later that month, Charles C. Maynard became chief executive officer of Skysite, a provider of satellite-based wireless communications equipment and services. Formerly CEO of Cybernetic Services, a public media and satellite network company, Maynard’s experience also includes positions as: managing director of TeleDiffusion de France, a division of France Telecom; president of Cincinnati Bell Messaging Services; vice president of Cincinnati Bell Yellow Pages; and chief operating officer of Bell Laboratories.
The Skysite system is an integrated web of mobile terminals delivering dial-up voice, wide-area dispatch, fax and data communications through contact with three L-band satellites in geosynchronous orbit over North America that are owned by American Mobile Satellite Corp.
On a scale of one to 10, the Skysite system offers a security level of about nine, while Iridium’s degree of encryption offers security above 10, Wussler said. Skysite’s average talk time rate is about $1 per minute, he said.
“Iridium is a more esoteric service geared to the Exxons of the world that have widely dispersed facilities in remote areas. Skysite is going after small companies, so this is a terrific combination,” Wussler said. “We are in discussions with Florida to tie together their nine state agencies, and with other states to link their coastal and land-based (facilities).”
A month after purchasing Skysite, U.S. Digital agreed to acquire a 15-percent interest in First Internet Capital Inc., Boca Raton, Fla. First Internet serves as a consultant to smaller businesses that are planning to go public or have recently done so.
“This is a strategic investment that will also give U.S. Digital direct access to financial planning and corporate finance experts,” said an equity research report by Michael A. Hardesty, analyst for Westergaard Online Systems Inc., New York.
U.S. Digital expects to close out 1997 with $6 million in revenues and $10 million in privately raised capital. “All U.S. Digital products and services are ready for volume sales and should create revenues of $14 million in 1998 and $25 million in 1999, with operating profits beginning in [the fourth quarter of] 1998,” Hardesty said.
The company, whose Skysite subsidiary had 300 subscribers as of July, expects that acquisitions and internal growth will hike that number to 200,000 within four years.
“The average commercial value per subscriber is currently $500 and is expected to increase to $1,000 by 2000,” Hardesty said.
While U.S. Digital is on a carefully orchestrated buying spree, the company itself “could become a prime takeover candidate for a number of large telecommunications companies that already have made huge investments in the global mobile market,” Hardesty said.
