NeTrue Hopes to Build on Overseas
Business With New U.S. Offerings
For most U.S. companies, global expansion follows a predictable pattern: 1. Establish a foothold in the domestic market. 2. Open offices and look for customers in a country with a similar customer base. 3. Repeat as necessary.
James Shen hopes to overhaul the sequence for his Fullerton company, NeTrue Communications Inc., a company with an established overseas business that now is targeting the U.S. with a set of new products and services.
It’s a risky gambit for a company that is doing just fine with its current strategy. The company provides voice-over-Internet technology, which allows people to make low-cost phone calls over the Internet. NeTrue sells its “phone-company-in-a-box” systems mostly to overseas telephone service providers, which can then offer an alternative to their standard, often pricey, long-distance services.
NeTrue boasts some of the largest overseas phone carriers as customers, including China’s state-owned China Telecom, Chinese oil giant China Petrochemical Corp. and Sweden’s Telia. And sales this year are on track to nearly triple, from $10 million last year to $28 million. Most of those sales are overseas, and 80 of the company’s 140 employees work in China.
NeTrue’s technology,also known as Internet protocol telephony or voice-over IP,has been slow to catch on among U.S. users because of so-so voice quality and the relatively low cost of long-distance calling here.
U.S Market Next
Now the company is hoping to entice the U.S. market with the technology’s second wave, capabilities that go beyond offering a discount version of what Alexander Graham Bell had working decades ago. Among them: software that helps guarantee certain levels of service and new applications not possible on ordinary phones.
Shen, who’s stepping back from the company’s day-to-day operations, knows the company will have to move fast as other countries begin deregulating their telephone markets, which likely will cut prices and diminish the appeal of cut-rate calling. And some Internet services now offer Internet phone calls for free.
In a promising start, Lucent Technologies Inc. is one of NeTrue’s first U.S. customers.
Some of those second-generation features include a service that will make it possible for Web sites to have a button or link that allows customers to speak with a company representative. Another is a system that automatically delivers animation, video and sound to people viewing certain Web sites.
“The idea is to keep pushing things at you until you get tired and buy something,” Shen jokes.
He plans to target Internet service providers and telephone carriers, which would sell the capabilities and add-on services.
In the meantime, NeTrue is looking for $10 million to $15 million to beef up its sales force and expand research and development efforts. The company hired chief financial officer Eric Gurr a few months ago and is looking to add more top-level executives over the next few quarters, in addition to at least 60 other workers in the next year.
Shen never expected to stay long when he arrived here from China in 1988 with little more than $50 and a scholarship from the University of Southern California. But longing to hear voices from home and frustrated by the cost of international telephone calls, he saw an opportunity to use the Internet,back then only beginning to emerge as a mass medium,as a new kind of phone service.
He found an investor to put in $500,000, a figure that in hindsight left NeTrue woefully under-funded. Since then he has attracted about $4.5 million from individual and institutional investors, including Global Light Telecommunications, a Canadian firm that owns 40% of the company, and Shanghai Bell, which owns 7%.
Challenges Ahead
Though he does much of his business in his native China, he says he stayed in the United States because of its entrepreneurial spirit.
He says his biggest challenge will be the missionary-like task of selling customers on the technology.
But he expects to have an equally challenging time getting his company listed on the Nasdaq exchange. NeTrue appears now on the Canadian Venture Exchange, a small-cap stock market.
Graduating to Nasdaq, he believes, will come as a natural result of his company’s growth.
“I was always ambitious,” Shen says. “I knew where I wanted to go, but I didn’t know how to get there. Now the road is a little clearer.” n
