Jeff Benck’s new game plan for Irvine-based Lantronix Inc. is in motion after taking the helm of the sputtering networking equipment maker late last year.
The company, which has seen sales fall for four straight years, has taken several new operational and strategic turns in a bid to capture more of the booming Internet of Things market. It’s also cut product lines that missed the mark.
The moves were part of a restructuring plan announced in February, and have included bringing in new executive leadership, consolidating operations in Japan under the umbrella of the company’s Asia-Pacific region, and sunsetting its mobile printing business.
The xPrintServer—the first product launched by former Chief Executive Kurt Busch—gained industry kudos at CES in January 2012 for its plug-and-play compatibility with Apple Inc. devices but quickly became a commodity in the fast-moving tech sector.
“That was an area that was getting a lot of marketing attention and a lot of engineering investment,” said Benck, who in early December replaced Busch, who resigned to pursue other interests. “It ran its course.”
That sentiment could define the company’s rocky standing over the years, which have been plagued by management and board shake-ups, not to mention financial losses.
Lantronix makes electronic devices and related software that allow secure online communication with medical equipment, security devices, smartphones, motor vehicles, meters and thermostats, retail terminals and ATMs, among others.
Benck has steered resources and investment into beefing up the company’s Internet of Things business, a segment that is expected to balloon from $157 billion in global sales this year to $661 billion by 2021, a compounded annual growth rate of 33.3%, according to Ireland-based Research and Markets.
Gartner Inc. in Connecticut projects 20.8 billion devices will be connected by 2020, up from 6.4 billion this year.
Part of the push by Lantronix into the burgeoning sector has included launching a subsidiary in India. The company now employs 16 at an IoT software development lab in Hyderbad—a center of the high-tech industry on the subcontinent.
Benck, during his seven-year run at Costa Mesa-based Emulex Corp., built an operation with more than 300 employees in India, the world’s second most populous country.
He left Emulex amid cuts that followed the networking gear maker’s sale last year for $660 million to Singapore-based Avago Technologies Ltd., which keeps its U.S. headquarters in San Jose and has since acquired chipmaker Broadcom Corp., its campus in Irvine, and taken on the name Broadcom Ltd.
Lantronix aims to make use of the deep IT and engineering talent in the India and other parts of Asia as it builds a greater presence in key markets there and global operations overall.
Add-Ons
A key to Lantronix’s hopes in the IoT market is pegged to add-on services such as data analytics, customer support, maintenance and migration—all potential new recurring revenue streams based on subscriptions.
“We used to just make the connection, but now we can help you manage and securely access data from your devices,” Benck said. “We see that as the strategic play.”
Indeed, Lantronix’s technology has been used by industrial and enterprise customers for more than 25 years. The company’s new wave of IoT gateways remotely monitor matters ranging from water consumption and usage for municipalities to grinders in coffee shops around the world. The devices are being built into train systems in Asia, allowing them to communicate arrival and departure times. Sports networks rely on its band management services—another area of focus—so they can access the network anywhere in case of an outage.
Its out-of-band management business has grown more than 200% year-over-year.
“There’s an opportunity for us to continue to gain share in that space,” Benck said. “We have a leadership product. It has some good momentum building on it while we continue to invest in IoT.”
Street Wise
Wall Street investors have shown some slight cheer on Lantronix shares in recent weeks, but seem to be awaiting more details on the comeback bid.
“I want to put up the results and start putting points up on the line so we have a story to go to take to the Street,” Benck said. “A lot of it comes down to getting the right team in place. We’ve just got to get focused.”
Lantronix posted sales of $40.6 million in the 12 months through June—the end of its fiscal year—down 5.3%. It reported a net loss of $2 million, compared to a net loss of $2.8 million in the same period a year earlier.
“We’re not going to cut to profitability; we want to grow the company,” said Benck, who rebuilt the sales team in the Americas to better reflect the new strategy, which included launching a new channel distribution program. “This is a bit of a turnaround.”
Worldwide Channel Manager Stephen Ashauer, who was hired in May, was a former field sales manager at Avago and then Broadcom Ltd.
He’s among a handful of new hires Benck knew during prior executives stints at Avago, Emulex and its Costa-Mesa rival QLogic Corp., which was acquired last month for $1 billion by Silicon Valley chipmaker Cavium Inc.
Global consolidation, which has swept up several local technology companies in the last few years, has generated a new wave of job seekers with lots of experience.
“We’ve been a beneficiary,” Benck said.
One of his first hires in February was Chief Technology Officer Sanjeev Datla, who spent three years as vice president of cloud initiatives at Emulex after his Sunnyvale-based startup ServerEngines Corp. was acquired in 2010 for about $159 million. Datla was a founding executive at ServerEngines, a Broadcom offshoot that specialized in converged networks.
Lantronix hadn’t had a CTO in more than a decade.
“We needed some help in the technical direction we needed to go,” Benck said.
He also brought in Kevin Yoder as vice president of worldwide sales. Yoder held a similar role for the Americas region at Avago, where he was responsible for driving more than $1.3 billion in annual sales.
Udaya Kumar, the new regional sales manager in India, worked under Benck at Emulex.
Lantronix’ evolving story on Wall Street, which lightly tracks the company, has rekindled interest in some investment circles. Its shares, which are down about 4% this year to a market value of about $21 million, exchanged hands more often during one recent session than they had in an entire year.
Private equity fund manager Martin Hale Jr. in June joined the board at Lantronix after his New York firm Hale Capital Partners acquired more than 1.9 million common shares for $2 million.
