For Immigrant, a Billion Dollar High-Tech Deal
By Mark Leibovich and Mike Mills
The classic dream of entrepreneurial America came true in Landover yesterday: Jeong Kim, a Korean-born immigrant who once worked the night shift at 7-Eleven to put himself through school, sold his company for $1 billion.
Under the deal, $510 million is to go to Kim, the rest to the other shareholders of Yurie Systems Inc., a maker of advanced communications equipment. His share would put him on Fortune magazine's list of the 100 richest high-tech executives in the country, ahead of such magnates as Sun Microsystems Inc. chief executive Scott McNealy and Intel Corp. chief Andrew S. Grove.
"I had always felt I wasn't the smartest," the 37-year-old Kim said in a telephone interview yesterday. So he compensated by working impossibly long hours 120 a week early on, he said. "People can look at someone like me," he said. "They see someone who looks different, who speaks with a funny accent. And maybe they'll say, if I set my goals high, maybe I can succeed like that, too."
Kim and Yurie (he named it after his eldest daughter) are the most dramatic example to date of the wealth being generated wholesale by the technology companies that dot the Capital Beltway, employing close to a quarter million people. Companies born from government contracts, such as Yurie, are expanding into the commercial world in such fields as software and the Internet.
Removed from the staid and insular world of retail, banking and real estate firms that once dominated the region's economy, they are transforming the area into a fertile entrepreneurial zone.
"Yurie is a billboard ad for America being a nation of immigrants and a place of opportunity," said James Woolsey, former director of the CIA and a member of the Yurie board of directors.
Financed by maxed-out credit cards and second mortgages, and getting some initial help from a government program for minority-owned businesses, Kim built Yurie in just five years into a world leader in an emerging field of advanced data-transmission known as "asynchronous transfer mode."
The company makes a gizmo that is much sought after by companies seeking less expensive ways to handle voice and data transmissions. Its main product, dubbed the "Yurie box," is an electronic device that helps transmit data, voice and video feeds over the same computer network. This allows for faster and more efficient communications.
The company's growth has consistently defied expectations: Yurie's most recent quarterly profits increased 456 percent to $3.8 million, compared with the quarter a year earlier, while sales soared 127 percent to $19.1 million. Today it accounts for 28 percent of what's still a relatively small market $122 million in sales per year for asynchronous transfer equipment, according to market research firm Vertical Systems Group.
But the prospects for the company and the market seem so attractive that telephone equipment manufacturer Lucent Technologies Inc. made Kim the $1 billion offer he couldn't refuse. The deal is subject to regulatory approval.
The rocket ascendency of the company, which today employs 240 people at offices near the Landover Metro station, is closely entwined with Kim's immigrant struggle.
He arrived in Anne Arundel County from Seoul with his parents when he was 14. He attended class during the day and worked the counter at a 7-Eleven at night so he could go to college.
Some classmates teased him because of his accent and Asian heritage, Kim recalled yesterday in a phone interview. "People who are successful are often those who feel they have something to prove," Kim said. Still, he added, "I got to a point where I was essentially comfortable with myself," and he embarked doggedly on a mission to build his own company.
Kim won a scholarship to study electrical engineering at Johns Hopkins University, graduated in three years, then earned a PhD in engineering from the University of Maryland in only two. He spent seven years as an officer on a United States Navy nuclear submarine.
After leaving the navy, Kim worked as a contract engineer for Allied Signal Corp. at the Naval Research Laboratory. There he came up with an idea on how to use asynchronous transfer technology to give the military something long on its wish list: multimedia communications with the battlefield in the form of instant voice, data and video feeds from international hot spots.
At the laboratory, he was encouraged in his idea by associate director Herbert Rabin, who had been an associate dean at the University of Maryland engineering school.
Kim left Allied Signal and created Yurie in 1992, under the name Integrated Systems Technologies, as an "8a" company that qualified for the Small Business Administration's minority preference program. A company spokesman, however, said Yurie has never sought or received any government contracts through the program because Kim "does not believe in" such government help.
General Services Administration records show that the company did receive a $305,000 Defense Department contract through a separate program for small, minority owned businesses.
Helped by Rabin's contacts, Yurie amassed a top-drawer board of directors that includes, along with former CIA chief Woolsey, former defense secretary William Perry and Kenneth Brody, former head of the Export-Import Bank.
The company captured the attention of Pentagon brass almost immediately: A prototype Yurie box strapped to a Jeep was used to pipe video pictures of polling booths during 1995 elections in Haiti. Yurie equipment also saw action in Bosnia.
Soon, the firm was attracting attention from big companies. In 1995, Yurie signed an exclusive deal with AT&T Corp.'s equipment division, which later became Lucent, to market its products to federal agencies.
After $6 million of sales through that channel, Kim got AT&T to drop its exclusivity requirement and struck separate sales deals with other big equipment companies such as Bay Networks Inc., Ericcson Inc. and Lucent. Yurie found itself supplying the world in a very fast-growing market. Last year, it sold its first shares to the public.
Lucent officials said yesterday that Yurie's headquarters would remain in Landover and that no layoffs were planned. Kim will become president of Lucent's carrier networks division, which will include the former Yurie.
Yurie's stock rose $3.25 to close at $34.75 yesterday, while Lucent fell $1.43¾ to $71.93¾.
Kim avoids any hint that his success will change him. An avid raquetball player, Kim said he had always made a point of playing people who are better than he is and will continue that approach. "I always try to win, but losing teaches me humility," he said.
© Copyright 1998 The Washington Post Company