IMC is Lower-Cost Rival to Foundry
Foothill Ranch-based IMC Networks Corp. has been in Orange County for more than a decade, but not many in the local business community know about the maker of optical networking components.
“We’re more well known overseas than here,” said Michael Dailey, IMC’s chief executive and president.
The company is a privately held firm and counts nearly $20 million in annual revenue, according to Dailey. IMC provides gear that converts signals from speedy fiber-optic networks to older, slower copper lines. It also produces fiber-optic repeaters that help network installers maximize the capacity of copper and fiber cabling.
Fiber-optic networking is an area that has been red-hot until recently as big fiber network operators are expected to slow spending next year. But IMC founder and chairman Jerry Roby said demand for his company’s products, which aren’t dependent on the rollout of new networks, still is strong.
“I don’t think the market is slowing down at all,” he said. “It’s growing like a weed.”
IMC recently moved from a 19,000-square-foot facility in Irvine to a 35,000-square-foot building that it designed in Foothill Ranch. The company, currently with 70 employees, has plans for 25% a year annual growth.
“We think we can take this company to a $100 million a year range out of this building,” Roby said.
Roby’s company gets high marks from a former colleague, Larry Stevenson, the founder of Newport Beach-based Newport Systems Solutions, which was sold in 1994 to Cisco Systems Inc. of San Jose for $91 million in Cisco stock,a stake worth about $4 billion today.
Cisco has turned Newport Systems into its main operation in OC. The unit operates out of a 63,000-square-foot facility at the University Research Park next to the University of California, Irvine.
Stevenson said he thinks IMC has a good product line that can help bigger networking gear makers solve problems.
“Every manufacturer cannot solve all the problems,” he said. “I think they got a great vision of what the fiber-optic companies need.”
Roby founded the company in 1988. IMC is an acronym for “It’s my company.” Roby has lived an exotic life by any standard, including 20 years overseas. He currently lives at the Summit in Lemon Heights and drives a red Corvette, among other sports cars.
He doesn’t actively seek publicity, saying he reluctantly postponed his Friday golf game (by a few minutes) to give an interview for this story at his company’s headquarters. And he is not one to mince words.
“It doesn’t take money to start a company,” he said. “It takes balls.”
Roby first began working with computers in the late 1950s, when he was a military linguist working for the National Security Agency. “I wrote a program to crack Chinese code. It worked,” he said.
After he left the military, he traveled overseas as a consultant and salesman, spending 10 years in Europe, five in Asia and another five in South Africa. To this day, he remembers the aggravation of ordering products from the U.S. with the wrong parts. “It used to piss me off to get American power cords,” he said.
In the late 1980s, Roby was working as an international consultant for Irvine-based Gateway Communications Inc.
“They wouldn’t do what I thought they should. So I sat down with an engineer. We made the world’s first 16-bit Ethernet server card,” he said. “Today, that’s no big deal. It used to sell for $395. Now it’s a commodity that sells for $15. From there, we got the idea to supply more and more niche products.”
Roby said he invested $750,000 of his own money into IMC. Dailey, who also worked at Gateway, joined Roby in 1988. IMC’s key was to help companies upgrade their technology without having to change their cables.
But Gateway was not pleased. The company sued Roby, saying he stole business secrets and lured away employees to design a rival product line. Roby said he eventually prevailed in the lawsuit, but said it almost caused him to go out of business.
“It was a vindictive attempt to put my ass out of business,” Roby said. “But they are out of business and here we are, 12 years later.”
Roby said there was a power struggle at Gateway and it caused his departure, as well as that of Newport Systems’ Stevenson, who was working at Gateway at the time.
“At the time, I thought I was on the losing end,” recalled Stevenson. “Jerry’s a go-getter,” said Stevenson in a phone interview from his Pebble Beach home. (He also has a home in Laguna Hills.) “We used him at Gateway because of his tremendous background. He has great experience. He has knowledge of international marketing and an awareness of start-up channels.”
Roby said the first few years were tough, typical of any startup.
“It was all outgo and no income,” said Roby, adding, “But we never missed a payroll.”
In the early stages, he said the company almost ran out of money, but one of its keys to staying alive was telling the truth to its vendors, which kept working with the company.
“We didn’t lie to them,” Dailey said. That’s why he likes to say the vendors are as important as its clients. “We open our kimonos and tell them the truth.”
Nowadays, IMC’s top challenge is to look for the next product to manufacture. Its salesmen ask their customers what products the company should make. IMC recently announced a new product called iMediaCenter, which the company said makes media conversion both easy and cost-effective.
“Managed media conversion is becoming increasingly important, especially in mission-critical applications such as connecting e-commerce servers to the gigabit backbone, and in long-distance fiber optic runs used to extend enterprise LANs to remote offices often hundreds of miles away,” Dailey said.
Typically, Internet service providers buy products from companies like Foundry Networks Inc., a San Jose-based firm that became famous in 1999 for what was then the second-best public stock debut ever when its shares soared more than 500% on their first day. Nowadays, Foundry has come back to earth, but it still has a nearly $6 billion market cap. IMC makes some products that are similar to Foundry’s,but at a fraction of the cost, Dailey contends. The company’s Web site recently had a banner more akin to a grocery store than a high tech business: “IMC Networks is having a super sale!”
“We are the Burger Kings of the fiber world,” Dailey said.
Competitors include: Transition Networks, a unit of Hector, Minn.-based Communications Systems Inc.; Nashua, N.H.-based Aura Networks Inc., formerly Lancast Inc.; and Allied Telesyn International of Bothell, Wash.
Roby said going public is in the “realm of possibilities” for IMC. “It wouldn’t hurt my feelings to go public,” he said.
Among the company’s current customers are Santa Ana-based distributor Ingram Micro Inc. and Lucent Technologies Inc. Currently, 62% of IMC’s revenue is generated from overseas customers, down from 80% in prior years. The company wants to make 65% of the business domestic and 35% overseas, saying it’s more of an industry norm. As such, he believes making more contacts in OC will be good for business. “We need to meet more people in Orange County,” Roby said. n
