Lee Hancock, president of Irvine-based Go2Systems Inc., says he is letting up on the gas pedal,for now.
Go2Systems, which offers directories of restaurants and other businesses for users of Internet-linked wireless phones and handheld devices, recently laid off 27 of its 110 employees. The company also has delayed or scrapped services it had planned to unroll. The moves are designed to cut costs amid a slowdown in the wireless sector, Hancock said.
“We’re just matching up our construction and spend with the demand,” he said. “The demand is still growing. But it’s not growing as fast as everyone thought.”
Hancock said 2-year-old Go2 continues to eye growth,albeit more slowly then the break-neck speed of years past. The company announced today that it has signed on Burger King Corp. as a partner and hinted that it’s looking to close deals with 16 other undisclosed clients.
The Burger King win adds muscle to Go2’s list of partners, which includes wireless phone service providers such as Verizon Wireless and Sprint PCS Group and chains such as Johnny Rockets and Diedrich Coffee.
Go2, which went from about 15 employees to 110 in the past year, has tried to match the growth pace that industry analysts initially predicted for wireless subscribers. Hancock said that was “50% per month or something way off the charts.” This year, industry growth is slowing to more like 20% per month, he said.
“It’s hard to talk about a 20% growth rate as a slowdown,” Hancock said. “Nevertheless, that’s really the way that people are characterizing it in the industry.”
Go2 has set up a network of Web sites that allow Internet users looking for a nearby business to type “Go2” plus a word describing the business. Go2 and Aliso Viejo-based Johnny Rockets Group Inc. have a pilot program from which wireless phone users can order to-go food and pay for it before walking into the restaurant. Go2 still plans to expand the service to other partners, but not until 2002, Hancock said.
Meanwhile, Go2 plans to pursue another round of funding in the next two or three months, Hancock said. The company has raised about $27 million in venture funds so far, enough to make it to 2002, according to Hancock. Go2 has yet to turn a profit but its sales have been growing, he said.
But more money isn’t likely to come easy.
“You have to look deep, but there have been some fundings even in the last few weeks,” Hancock said, “many of them in the wireless sector.”
Go2 has aligned with major wireless communications carriers, Web sites and phone makers, as well as restaurants and brand names such as Coca-Cola Co. Plus, Hancock contends, the wireless sector Go2 serves is 5% developed, vs. the Internet, which is about 40% to 50% developed. And, he points to traditional printed phone directories, which are a $12 billion-a-year business in the U.S.
“If we build a great business, the funding and the long-term strategic relationships will take care of themselves,” Hancock said.
Still, challenges remain. Hancock said some wireless phone makers have been slow to release phones that can access the Web.
And someday Hancock hopes portals like Yahoo! Inc., which offer similar services and have their sights set on the wireless sector, will warm up to partnering with Go2. At least one, Excite@Home Corp., recently integrated Go2’s services into its wireless portal Excite Mobile.
Hancock concedes Go2 faces more challenges than he originally anticipated. Using an airplane analogy, he said his business may be facing a bit of a head wind, but ultimately “the company will fly.”
“We feel very good about the fundamentals of the business and our long term prospects,” Hancock said. n
