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IDirect Finds New Niche in Satellite Market

By Ellen McCarthy
Thursday, March 24, 2005; Page E01

When John M. Kealey was recruited to take the top spot at Herndon satellite company iDirect Technologies, he hedged his bets. Kealey moved into the executive office but refused to officially take on the role of chief executive. If the ship sank -- and it seemed well on its way -- he didn't want to be the one facing the blame.

The firm was burning more than $7 million a quarter when Kealey signed on in late 2001. The $40 million in venture capital it had raised during the roaring 1990s had all but vanished.

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IDirect was founded in 1994 by a group of engineers who believed that traditional satellite networks used to transport video feeds and small amounts of data would be usurped by new digital networks that could carry much larger amounts of information at a lower cost.

So the company tried to capture the digital market, leasing expensive satellite access and attempting to compete as a service provider against telecom giants such as WorldCom and British Telecom.

It didn't work. The small firm struggled to get in the door with potential clients who had established relationships with their communication service providers. The salaries of iDirect's 110-person staff and its pricey satellite leases were driving it toward bankruptcy.

So Kealey pulled the company out of the service business and pared its head count to 42. Then he tried to reintroduce iDirect to its former competitors as a product company that might be able to save them money.

Instead of selling satellite access, the company developed and began marketing servers that allow more data to be transmitted. If a telecom provider needs to help a client get Internet access in a remote part of Africa, for instance, it is more likely to use a satellite connection than build a fiber network. Kealey said iDirect's servers can save carriers up to 80 percent of the traditional cost of such a service.

This plan seems to be working. IDirect brought in more than $50 million in revenue during 2004 and has a client list that includes France Telecom, MCI and BT Group (formerly British Telecommunications). The company's staff has grown back to 115 people, and the U.S. military, which constitutes 35 percent of iDirect's business, has more than 1,000 units roving around Iraq with Internet connections powered by the company's technology.

Since Kealey came on board, iDirect landed an additional $5 million in venture capital, and he says the privately held company has been profitable for eight straight quarters. Today Kealey will get a bit of added recognition for his efforts when he is named "Satellite Executive of the Year 2004" at an industry conference being held this week at the Washington Convention Center.

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