Talk is not cheap, at least not when a company's remote
computer terminals are doing the talking. Telephone lines and microwave signals transfer information
among far-flung computer terminals, and the more capacity is needed,
the higher the cost.
Infotron Systems Corp. in Cherry Hill has grown explosively
by selling one solution to high transmission costs: equipment
that allows computers to 'talk' to each other at high
speeds and that reduces the number of telecommunications circuits
needed.
In 1978, Infotron's annual sales were $7.32 million.
Last year, its sales totaled $51.24 million, up 50 percent from
1982, the coompany reported recently. Net income more than doubled
in 1983 to $6.23 million or $1.31 a share from $2.38 million or
56 cents a share in 1982.
The company's stock, first offered to the public
in March 1981, has sold as low as $7.25 a share, during the first
quarter of 1982, and as high as $45 a share, in the second quarter
of 1982. It closed at $29.25 Friday in the over-the-counter market.
"They're involved in the right market at the
right time," said David R. Sarns, telecommunications analyst
for Alex. Brown & Sons Inc., a Baltimore securities firm.
As business and government form more and more computer
networks—with terminals all over the world—demand for data communications
products made by Infotron and others will increase, analysts say.
Such networks are used to collect the latest sales
information from a company's regional sales offices, to send electronic
mail from a company headquarters to a branch office or to electronically
deposit millions of dollars from a foreign bank to one in the
United States.
Even the Bell telephone operating companies, now
divested from American Telephone & Telegraph Co. and paying
long-distance telephone bills like other businesses, are using
Infotron equipment to connect parts of their computer networks.
"It's a rapidly growing pie," Sarns said
of the data communications market.
Infotron's main business is producing 'statistical
multiplexers' and related types of data-communications equipment.
A multiplexer collects data from several computer terminals and,
speeding up the transmission time, sends the data over a circuit
to a main computer, where it is unscrambled by a multiplexer.
If each computer terminal were tied to a main computer
by its own 'pipeline,' such as a microwave channel or
a leased telephone line, the transmission speed would be much
slower, and the pipeline would be in use only when the computer
user was actually sending or receiving data. And the company would
be paying to lease each individual pipeline.
With multiplexing, many signals are mixed into one
high-speed pipeline. The multiplexer, a computer in itself, finds
empty spaces in the pipeline to fit all the data.
Citibank of New York used Infotron multiplexers worldwide.
Banks or corporations who want to plug into Citibank's computers
make local phone calls, and their signals are sent through a multiplexer
to New York by cable or satellite circuit.
Without multiplexing, the transmission costs "would
be horrendous," said Ted R. Brady, a Citybank vice president
for telecommunications development.
Another customer, MCI Telecommunications, the long-distance
subsidiary of MCI Communications Corp., uses about 440 Infotron
network concentrators and multiplexers to connect a nationwide
computer network, said John M. Murphy, an MCI systems manager.
The network is used by MCI technicians to upgrade its long distance
system.
Such needs—transmitting data economically and quickly—will
mean 35 percent annual sales growth for Infotron during the next
five years, predicted George G. Zoller, Infotron's vice president
of finance.
The company has outgrown its leased 183,000-square-foot
plant in Cherry Hill Industrial Center, off Springdale Road, and
will lease 48,000 square feet of extra space in the industrial
park. Its work force in Cherry Hill is about 550. The rest of
its 700 employees work elsewhere, including Infotron operations
in Puerto Rico, England and Canada.
Zoller predicted that worldwide employment could
reach 2,500 by 1990 as Infotron buys other data communications
companies and adds to its product lines.
But to maintain its growth, Infotron will have to
improve its marketing, said Andrew M. Schopick, financial analyst
for the Gartner Group in Stamford, Conn.
He said 1983's "apparent strong performance
does reflect a recovery from the disappointment in 1981. I'm anxious
to see whether Infotron will display a greater aggressiveness
in the marketplace."
Late last year, Infotron increased its sales force
by 30 percent, although it would not say how many salespeople
it employs. Analyst Sarns at Alex. Brown said the regional Bell
operating companies, such as Bell Atlantic Corp. of Philadelphia,
in a few years might emerge as key distributors of data marketing.
In the late 1970s and in 1980 and 1981, a common
criticism of Infotron was that it was engineering-oriented rather
than marketing-oriented, Alexander said. For example, engineers
would decide to add to the capacity of a product by 'gut
feeling' without market research, he added. "Now, the products which are designed are market-driven
products and not engineering-driven products, he said. Infotron now tries to anticipate market demand.
"If you want to shoot a flying duck in the sky,
you cannot aim where it is now, you have to aim where it will
be two minutes from now to shoot it, Alexander said.
Infotron's disappointing performance in 1981—when
net income fell to $1.03 million from $2.51 million in 1980-also
reflected a shift in the company's main line of business, Zoller
said. The company had been a maker of small-volume multiplexers,
used from one terminal to the computer. The product cost between
$10,000 and $12,000, and a sale took about six weeks, he explained.
Then, in 1981, it switched to pushing more sophisticated
multiplexers that cost between $80,000 and $100,000. Because completing
a sale of the more expensive product typically takes longer, the
shift in Infotron's business caused a pause in Infotron's growth,
he said.
