Data Down to Size
By Beth Berselli
Jeong H. Kim is the first to admit that he always has dreamed big. When the 36-year-old Korean immigrant started his own high-tech business five years ago, he had three main goals -- to move from a consulting practice to developing actual telecommunications products, to enter commercial as well as government markets and to take his company public.
Sounds overly ambitious? Not for Kim and his Landover company, Yurie Systems Inc. The company, which makes equipment that transmits voice, video and data over phone lines as well as satellite and wireless networks, has achieved all of Kim's objectives, and it has done so in a fashion that's made the technology community sit up and take notice.
Among the examples of the company's recent success:
In February, Wall Street swooned over Yurie's initial public offering, sending its stock up 23 percent in its first week of trading on the Nasdaq Stock Market. (The stock, which debuted at $12 per share, has since climbed to Friday's close of $23.12 1/2.)
In May, a grinning Kim graced the cover of BusinessWeek in honor of his company's selection as the hottest of the magazine's "Hot Growth Companies" of 1997. The magazine cited Yurie's astounding growth in earnings, up 410 percent annually over the past three years, and in revenue, up 385 percent annually in the same period. Last year Yurie had net income of $3.2 million on sales of $21.6 million.
And just two weeks ago the company announced more good news: Almost 70 percent of its 1997 second-quarter revenue was from the commercial market. That's a big switch from last year, when 96 percent of Yurie's sales went to the federal government or government contractors.
"This is a company in the right place at the right time," said Al Spiegleman, president of AM Consulting, a telecommunications consulting firm in Evergreen, Colo. "They're just going to be hugely successful."
So what exactly is the secret of Yurie's success? The flagship product is something called asynchronous transfer mode (ATM) access equipment. ATM, which was developed in the late 1980s, works by chopping all traffic -- whether it be voice, video or data -- into equal-sized cells. The standard size allows for very fast and efficient communications.
"Think of it as an office move," said Kim, who named his company after his oldest daughter. "You call the movers and they come and they ship your desk and paperwork in different ways -- truck, airplane, boxes. . . . If the moving company only used boxes that were all the same size -- which is what ATM is -- then less equipment would be required and the move would be faster."
Not everyone, however, is convinced that Yurie has the ATM market cornered. Despite its many triumphs to date, the path facing Yurie is not without its obstacles, said Tom Nolle, president of telecom consultants CIMI Corp. Not many high-tech companies have been able to successfully move from the government to commercial markets, he said, adding that the two sectors require vastly different marketing approaches. In short, just because Uncle Sam loves Yurie's products doesn't mean corporate America will, too.
"I'd like to see an indication that they have a strong commercial marketing approach, and I haven't seen that," Nolle said. "They need to shine a light on themselves and show why they're better than the competition."
And what competition it is. Even Kim admits his company of 240 employees is an underdog in the fight against such market leaders as 3Com Corp. and Cisco Systems Inc., which both offer similar kinds of telecommunications equipment.
But bigger doesn't necessarily mean better. For Yurie, the biggest hurdle to success isn't technology but sales savvy, said Nolle. "Their product is solid; I just don't think they know how to sell it yet," he said.
Spiegleman dismisses such criticism. "There is absolutely no question that they'll succeed," he said. "Yurie has not only turned the corner but has turned it successfully."
Yurie also maintains that it can compete in the commercial world. The company said it has beefed up its sales staff, made a number of key management changes and wooed an all-star board, including former CIA chief R. James Woolsey and former defense secretary William J. Perry, to prepare for the challenges of commercial life.
These efforts are paying off, company officials said, pointing to a contract inked last month with SplitRock Services Inc. of Houston. Under the deal SplitRock will buy at least $20 million of Yurie's equipment over the next 18 months. Other new commercial customers include Applied Innovation Inc., a telecommunications company in Dublin, Ohio, and the Los Angeles Department of Water and Power, the nation's largest government-owned utility.
But Nolle said the SplitRock deal shouldn't be held up as an example of commercial success, pointing out that the chairman of the Houston company, Kwok Li, is Yurie's vice chairman.
Customers seem more than satisfied with Yurie's products and service. "We could have gone to Cisco or someone else, but they didn't really have what we were looking for. Yurie did," said Cory Grant, director of product line management at Applied Innovation. Grant's company recently purchased nine of Yurie's ATM devices and expects to buy dozens more. He praised Yurie's products, which range from $25,000 to $140,000, as "being very aggressively priced."
Yurie first sold it products to government agencies including the Defense Department. In part, that's because Kim, who served as a nuclear submarine officer in the U.S. Navy, knew what the military needed. The ATM machines have proven particularly useful at speeding military communications in places like Bosnia and Haiti.
In 1995, with an eye toward the commercial market, Kim signed an exclusive contract with AT&T Corp. Under the three-year, $26 million deal, AT&T is responsible for marketing Yurie's products to the federal government, thereby leaving Yurie free to pursue new commercial customers.
"I'm really proud of the technology we've brought to market. It's pretty significant," Kim said modestly.
YURIE DATA SYSTEMS
This Lanham company that was touted earlier this year as the nation's hottest growth company by Business Week makes ATMs -- but not the kind you might think.The company's asynchronous transfer mode products have set the industry standard for high-speed information transmission.
Closing stock price
Friday's close: $23.121/2
@CAPTION: Jeong Kim, founder of Yurie Systems in Landover, has reason to smile: His company was named the top growth company by BusinessWeek.
© Copyright 1997 The Washington Post Company