Symbol of Change
Symbol Technologies had all the markings of a company you wouldn't want to work for: It was being investigated by the Securities and Exchange Commission for allegedly prematurely recognizing revenue, and two former executives already had pleaded guilty to charges of inflating revenue. The man who helped found the company 28 years earlier left the firm under the cloud of these allegations, followed out the door less than six months later by the 25-year company man who had replaced him.
The company also was mired in a reputation as “the bar code scanner company” at a time when employees felt it should have been getting recognition for more modern-day wireless technology innovations. Lastly, workforce morale was fatally low as many employees were forced to work on a corporate restatement of earnings for the years 1998 to 2001.
“We were dealing with a subculture that was quite toxic,” said Bill Nuti, who was named CEO of Symbol Technologies less than three months ago.
A new CEO comparing his firm's previous corporate culture to nuclear waste is the definition of a man with his job cut out for him. Nuti took charge of the company following the late December resignation of Richard Bravman, who had been CEO and acting chairman of Symbol since previous chairman Jerome Swartz, a co-founder, chief scientist and holder of about 150 Symbol patents, resigned in July 2003. Two financial executives actually pleaded guilty during the first half of 2003 to charges they had manipulated revenue figures and misconduct.
The company spent much of 2003 conducting its own internal investigation into the charges, and eventually restated four years worth of earnings last month, just two months after Nuti was named as CEO and board member Salvatore Iannuzzi was appointed chairman.
But while acknowledging the depths to which Symbol had plummeted, Nuti claimed 2003 also was a year of change for the company and the beginning of its recovery from a period of “bad muscle memory.”
“Between the economy, the SEC investigation, Iraq and SARS, a lot of things contributed to Symbol's problems, and made them linger,” Nuti said. “But the fact is that we went from an unprofitable company to a profitable one by the third quarter of 2003. We doubled the company's market cap value.”
Symbol, Nuti said, has undergone an extreme internal restructuring in the last several months that is now being followed by a strategic facelift.
“We have 15 of 16 senior executives that are brand new. Teams have been restructured,” he said. One of the more recent additions was Anthony Bartolo, vice president and general manager of Symbol's wireless infrastructure division.
“I brought in a new sales vice president, he brought in new people, and those people brought in new people,” Nuti added. “We changed the sales and marketing program. We put change management programs in place across the organization, and we have changed the culture.” Nuti added that employees marshaled to work on the restatement of earnings last year have since been redirected to core business.
To many people outside of Symbol, that core business is developing equipment that scans bar codes and processes the information contained therein. The Holtsville, N.Y., company was called “the Rosetta stone of bar codes” by Hoover's Online.
But Nuti disputes the decidedly old-school perception. “Sixty percent of our revenue now comes from mobile computing solutions,” he said. “We're not just the bar code scanner company anymore, and we haven't been for while.”
The company has long been innovating on its original concept by creating industrial handheld devices equipped with mobile, Wi-Fi and Bluetooth connectivity. These devices have become the tool of choice for employees of large corporate enterprises in vertical markets, such as United Parcel Service.
However, Nuti said Symbol also is ready to widen its mobile computing vision. “We're at the beginning of the next great evolution in enterprise IT,” he said. “We've restructured with a new strategic focus on enterprise mobility.”
Symbol's expertise in mobile industrial handhelds gives them a leg up on that vision, but Nuti said there will be much more to it — an expansion beyond the company's current wireless LAN access points into other WLAN infrastructure; introduction of new voice solutions related to the voice over WLAN client Symbol already offers, as well as wide area network voice capabilities; a heavy push into software development; and innovation in RFID and biometrics.
The company already is making good on the first of these pledges, having announced late last month a new wireless LAN switch product for enterprise branch offices. The Symbol WS 2000 supplements the Symbol WS 5000, a WLAN switch targeted at large corporate headquarter deployments.
Yangmin Shen, director of technical marketing for Symbol's Wireless Infrastructure Division, said it was important for Symbol to bring something new to the crowded and competitive field for WLAN switching solutions.
”Many existing wireless LAN switches are really doing nothing more than managing access points,” he said. “There's not much intelligence in them, and all the intelligence is in the access point.”
Shen said Symbol “decoupled” RF capabilities from IP addressing and memory processing, and put the latter functions into the Symbol 2000. “The result is that you have IP addressing happening in the switch, and any application server functions. It's a branch office in a box.” he said. “what you are left with is very inexpensive access points that make it easier for you to decide about expanding Wi-Fi to branch offices.”
The branch office switches also do not need to be linked to one of the larger Symbol 5000s to work. This will make the product fairly appealing to service providers and operators of public Wi-Fi hot spots that want an inexpensive way to roll out new coverage, according to a Gartner Group report that described the Symbol 2000 as the “third generation” in WLAN management.
Shen said Symbol already has forged an agreement with Bell Canada to supply wireless LAN management products to the carrier. That kind of agreement could become increasingly common, Nuti said. Along with the strategic thrusts relating to technology, Nuti said he's also on a mission to align Symbol more directly with public mobile service providers than the previously enterprise-focused company has been in the past.
“We'll strategically align with service providers and certify our platforms to work on their networks. We'll work with them to resell our systems,” Nuti said. “We'll also do some technology development with carriers on the roaming front. We'll figure out seamless roaming between LAN and WAN.”
Though that seems like a big step for Symbol, it might not be all that surprising, given the background of the man who's now at the helm of the company. Nuti has been with Symbol only since August 2002, when he joined as president and chief operating officer, but he previously worked at Cisco Systems for more than 10 years, serving most prominently as the company's vice president of worldwide service provider operations.
Cisco Systems hasn't yet reaped the revenue gains from the service provider sector that many market watchers might have expected. “Bill and some other folks there created something that hasn't paid off yet,” said one industry analyst. “Still, the day he took charge at Symbol, a lot of people upgraded [their Symbol stock ratings].”
Robert W. Baird Securities and other agencies have elevated their target stock prices for Symbol's in the last few months. Baird analysts stated in a research note last month that the company, while still under stock pressure, had strengthened its position in both its traditional and new markets, such as mobile computing. Baird also saw potential in Symbol's bidding partnerships with service providers.
Nuti doesn't try to compare Symbol's new efforts to work with service providers with that of his previous employer, but said his experience and contacts in the carrier market only can have a positive effect on Symbol's chances at success.
“Some mobile operators are hearing about what's going on at Symbol now, and they're pursuing us,” Nuti said. “They understand that this company has gotten data and voice for the LAN right, and they get it that the company has changed.”
While carriers might be noticing, Nuti acknowledged he will be pressed to exploit his carrier experience and contacts during 2004 and beyond to make the Symbol makeover last.
“Now, I need to be more externally focused as a CEO, meeting our customers and partners and getting out there in the market,” he said. “We're reviewing our service provider goals right now to get a handle on the opportunity, but our sales teams are telling us they see a universe of opportunity.”
That kind of exuberance might sound risky for a company only a few months removed from corporate financial scandal. However, Nuti said the massive undertaking late last year to restate earnings took the luster off what actually was a comeback year for Symbol. “Financially, internally and strategically, we were already getting back on track in late 2003,” Nuti said. “In 2004, the big picture will be clear.”
Still, while Nuti insists Symbol has put bad times behind it, the SEC investigation is ongoing, and Symbol recently acknowledged a $72 million charge due to settlement of shareholder lawsuits and other issues related to the accounting scandal.
Also, both co-founder Swartz and Nuti's predecessor, Bravman, still are connected with the company as senior advisors — Bravman as an advisor to Nuti himself. These might be the kind of ties that many companies in Symbol's position would not allow to exist, but Nuti said the fact that Symbol's own internal investigations of the past revenue manipulation showed that neither man was directly involved in any wrongdoing was a significant factor in his decision to retain them.
“It's clear to me our internal investigation is closed,” Nuti said. He acknowledged there could still be further public investigation into “the actions of former associates” of the company.
However, Nuti ultimately doesn't see any threat of ongoing scandal at Symbol, nor any reason for the company to regress to its formerly “toxic” ways.
“We have built such a strong set of business controls into the company, and so many new best practices, that people in this company now would never be able to do the bad things that happened here before.”
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