Dale Quick

There are times when being a privately held company has its advantages. For one thing, private companies are not compelled to publicly disclose information about their true financial health to anyone but their investors.

According to Quintessent Communications Senior Vice President and Chief Operating Officer Dale Quick, there is more to it. “The market continues to batter [public companies] that miss their numbers more than it rewards them for meeting their numbers,” Quick says. “Right now it is really a good time to be a privately held company.”

Naturally, there is a caveat. “Now is a very good time to be a privately held company with cash in the bank,” Quick says.

Quintessent, a privately held interconnection gateway provider, raised $15 million last October in a round led by Cisco Systems. This brought the company coffers to $30 million for the year. Quick says this should be enough to bring Quintessent to profitability sometime early next year. “We are still in an overall net cash outflow position,” Quick says. “Our forecast calls for us to break even by the end of the year.”

The company is not actively seeking more funding but is making some cost containment adjustments. Quintessent has curtailed plans for international expansion and is holding off on investments to expand its product line.

Some jobs also were cut. “We did eliminate a few headcounts that were not absolutely critical to our business, but it was fairly minor and none of it was cutting muscle,” Quick says.

A reduction the size of Quintessent's is not necessarily a negative indicator of financial health, says one analyst. "In some ways when a company lays off 10% to15%, they are using the current market situation as an excuse to cut some people they maybe brought on to do things the don't need to do anymore," says Karl Whitelock, program director with Stratecast Partners. "On the other hand, their competitor DSET has shed more than 50% of its work force. That sends a different signal altogether. There is a company in trouble."

In the space Quintessent is in, muscle is required and a core business focus is perhaps more important than for other independent software vendors. Unlike other operations support system software companies that can sell, install and be off to the next sale, companies in the interconnect space must provide more long-term support. And it is expensive.

To keep their software compatible, gateway providers at times must paddle upstream against waves of rule changes coming down from the ILEC ordering systems.

“It is tremendously time-consuming, resource-consuming and ultimately cash-consuming to be making those changes if you are not geared for it,” Quick says.

Quintessent's Tele.Commerce suite of interconnection applications handles the order flow for access service requests, local service and E911 requests, local number portability and primary interexchange carrier customer account record exchange. The company offers the applications on a per-license basis and as a hosted application. Its business is evenly divided between the two models. Either way, Quintessent's mission, especially now, is to make the process of interconnection as automated as possible.

Quintessent has made a significant investment in automating the process to keep long-term costs down, Quick says.

“For a company in our space to be successful, you have to have enough of an account base that has purchased your products so that you can afford the upgrades and updates,” Quick says.

Quintessent's customer list includes its most recent wins with Cbeyond Communications, BroadStreet Communications, Adelphia Business Solutions and Broadwing.

“So far, I don't think we have had any customers close their doors,” Quick says. However, the company has missed out on some potential business. “We have had a couple of prospects that were unable to complete their last rounds of financing and fell off our pipeline.”

Even with offers of creative financing from Quintessent, potential customers that remain in the pipeline are putting on extra pricing pressure. “I believe those concessions are being driven by customers who see an opportunity to get us to work with them a little more,” Quick says. “They are being opportunistic about the state of the market and about how hungry our competition is.”

Quintessent admits it is sometimes priced higher up front but says the long-term cost of ownership is more competitive. Quick adds that companies that still are investing in this market are those planning for the long term.

And how will market conditions look down the road? “This will last until the weak have gone away and the strong are ready to make a full-on assault,” Quick says.