A conversation with Heico’s Michael Heisley

Michael Heisley started Heico Corp. with $150,000 from the sale of his house. Borrowing against cash flow from small acquisitions and making huge bets on a series of Rust Belt industrial companies on the verge of—or in—bankruptcy, Heico now has ownership in more than 30 different companies. Heisley--who made a big public splash when he bought the NBA’s Vancouver Grizzlies and moved them to Memphis--made his first acquisition in the U.S. telecom market by buying up switch vendor CopperCom last year. The Heico CEO recently spoke to Telephony’s Vince Vittore about his impressions of CopperCom, the telecom market overall and using wireless to market professional basketball.

On investing in telecom: It isn’t really the first time for telecom, because we did have [European hosting company] WorldPort. A lot of my assets have a lot to do with troubled assets. We timed the market very well with WorldPort. I looked at the telephone business and felt very strongly that the assets were very undervalued--if you could pick the right spots, it would be very valuable.

On choosing CopperCom:  The first thing that made me look further was the management team they put together. Probably the biggest asset CopperCom has in place is the management. Every one of these guys has a wealth of experience. The last thing I would want to do is mess with that organization. I also loved the fact that they were focused on the specific market. I like the idea that the technology has gone through the wring-out period. They also have a culture of service and reliability. [CopperCom CEO] Mike [Meyers] had focused all of his assets on creating a reliable product. I love the idea that the architecture they put together could be a family of switches.

On making moves with acquired companies: The biggest area we’ve got to do is improve the sales and marketing to get the message out. That’s the area you like to help. If you’ve got to fix the engineering, you don’t want to fix those types of companies.

On investment decisions: First, the opportunity has to present itself. Second is the management. I may not be the world’s best with technology, but I’m pretty good at judging the management of a company. When I started in the computer business, you knew if what you were selling didn’t work, it would ruin the company you were selling to. You really had the fate of that company in your hands. The thing I love about CopperCom is we’re in the same situation. It’s very exciting and rewarding. Of all the businesses I have, I’m probably most excited about CopperCom.

On the IOC market: I don’t want to limit what we do, but right now we feel this is an area that needs to be served. Until we get ourselves to where we serving that market well, we’re not going to focus anywhere else. We’re not blind to the situation that other people will move into the area. We’re the right product for the right time and the right market.

On exit strategies: Heico is an acquisition company, but not like other acquisition companies. The first company we bought is still in the family. We do divest ourselves of business, but we do it the opposite of a fund. If I were to sell, someone gives me a multiple. By the time I pay taxes, there really isn’t that much left. I’m not going to take a company public because I want to cash out. I’m going to take a company public because I need the capital.

On CopperCom’s future: My view of the future is to someday be a competitor to Nortel and Lucent. Or we may be focused on the IOC industry and be no bigger.

On telco acquisitions: When I first look at this industry, that’s where I was looking at. I realized that there are other more experienced companies doing that.

On additional telecom vendor acquisitions: We’re very interested in adding anything to the CopperCom asset that would make us broader-based. We’re looking for opportunity, but it’s got to fit in with what we’re doing. We’re going to be selective on who we tie ourselves up with.

On using wireless to market the Grizzlies: We’re constantly looking at wireless. I think very strongly that arenas are going to have to have ties in with wireless technology. I don’t see how it’s going to work out exactly just yet. [Heisley is working with Memphis officials on the final details of the FedExForum, where the Grizzlies will play next season.] I think [Dallas Mavericks owner] Mark [Cuban] put in a log of capacity in Dallas. We’re having discussions on budget right now. We’re cognizant of the technology and we will have the capacity to do it. Whether we have it when [FedExForum] opens, I don’t know. There’s tons of discussion out there right now. You’re making the decisions now, but you like to have someone plowing the ground ahead of you. I’d rather be number two or three. With the Grizzlies, we’re up to our ears trying to get an arena open by August. When you’re dealing with government, there a huge amount of work to be done. The last thing you want to do is throw in something into the pot at the very end.