Telect Seeks $150 Million From Ipo Capital Would Help Spokane Firm Produce New Telecom Products

Telect, the fast-growing Spokane Valley company producing network connection devices for communications systems, has announced plans to go public and raise $150 million for future growth.

The private firm filed an official registration to go public with the Securities and Exchange Commission this week, Chief Executive Officer Wayne Williams said Wednesday.

He said he hopes the initial public offering (IPO) will occur by year’s end. If investor interest is high, Telect will launch the IPO on the Nasdaq exchange, using the symbol TLEC.

Capital from the IPO would help Telect produce new products to be sold to key players in the surging telecom industry, Williams said.

Telect produces a long list of connection devices that help networks better transmit data over long distances. It has a production facility and offices at Liberty Lake with more than 1,000 workers.

Globally, Telect has a 2,000-person work force, with manufacturing centers in Mexico, Brazil and Poland.

The company has grown rapidly in response to explosive worldwide demand for products and services to build faster, bigger data networks.

Williams, 36, is the son of founders Judi Williams and Bill Williams. The company was launched in 1982 and has kept its headquarters in Spokane.

“The IPO is a good way to increase our financial strength and at the same time benefit our employees and our customers,” Williams said.

According to statements filed with the SEC, it also is the best way for Telect to compete with other major players in the network hardware industry.

Three major competitors - all bigger than Telect - are Lucent Technologies, Corning and ADC Telecommunications, based in Minnesota.

The network hardware industry is “a huge and vastly expanding market,” said Kevin Giboney, a high-tech analyst for D.A. Davidson and Co. in Seattle.

“It’s a time of incredible transition in this area of network build-out,” Giboney said.

Corporate and individual users are continuing to demand high-speed access to business information. Wireless companies are promising people will communicate from anywhere on the planet with a cellphone.

Those needs can be served only through a land-wired network that can manage vast streams of data intelligently and efficiently, Giboney said.

“That’s where the action is, companies all trying to establish why their products and their technology can give customers better control of their information,” he said.

Telect’s five-person board of directors is filled by the three Williams family members, plus Spokane venture capital manager Tom Simpson and businessman Samuel Hayes III, head of the School of Investment Banking at Harvard Business School.

Wayne Williams said he and the other directors spent nearly a year debating whether to go public or remain private.

In a newspaper interview last year, Williams said Telect’s future had two likely scenarios - being sold to a larger company, or deciding to go public.

“I’d rather be the acquirer than the acquiree,” he said then.

Losing private control creates a tiny shred of uncertainty, he said Wednesday. Once a company goes public, every decision comes under scrutiny by analysts and stockholders.

“It’s not that scary for me,” Williams said. “I’ve had nine months to get prepared for the process.”

Last year, Wall Street’s love of new Internet companies produced a torrent of IPOs.

This year, as pure-Net companies have taken a financial beating, IPOs have been far fewer. In fact, more than 90 companies who earlier announced an IPO later withdrew their plans.

SEC “quiet-period” rules prevent Williams or other Telect officials from commenting on the IPO’s likely success.

But Williams said, “If we were concerned (about a bad investment climate), we would not have made our filing yesterday.”

The initial filing with the SEC said Telect would sell up to 400 million shares of common stock and another 100 million shares of preferred stock.

The filing also explains that Telect employees will have a stock-option plan available once the IPO occurs. About 6.4 million shares of company stock would be set aside for Telect employees, the SEC filing said.

Telect has selected Deutsche Bank Alex. Brown as lead underwriter for the IPO. A prospectus will be available after SEC review and Telect answers any concerns raised by the federal agency, Williams said.

These two sidebars appeared with the story: FAST FACTS Telect Inc.

Offices: Liberty Lake.

Employees: nearly 2,000 worldwide; about 1,000 in Spokane.

Revenues: $126.9 million during first six months of 2000.

CEO: Wayne Williams.

Founders: Judi and Bill Williams. Privately held since 1982.

Chief products: connectivity devices for central and remote offices of telecommunication networks.

Chief customers: AT&T, Sprint, Verizon, Walker and Associates and Worldcom.

Growth factor: Overseas sales accounted for 1 percent of revenue in 1997; up to 14 percent in 1999.

TELECT What’s next

Telect’s filing will go through review by the Securities and Exchange Commission.

The review will take at least one month; then the SEC will publish any concerns about factual or financial statements.

Telect’s financial team will respond to SEC questions. When the SEC is satisfied, Telect can create a preliminary prospectus outlining the firm’s business plan.

Underwriters will contact major investors around the country, inviting them to consider buying the stock when the initial public offering occurs.

If they find adequate investor interest, the underwriters and Telect’s directors will set a date to launch the stock offering.