The confidence to sell equipment that he hadn't yet invented gave Buck Wilson an entree into the competitive world of telephone management devices.
If necessity is the mother of invention Buck Wilson could qualify as the old lady's press agent. Wilson is president of Automation Electronics Corp. in Oakland, Calif., a manufacturer of automatic call sequencers and other desktop telephone-management information systems. Incorporated in 1976, AEC rose to # 155 on INC.'s list of the 500 fastest-growing private companies in the United States in 1982, with a growth rate of 805% on sales of $7.8 million in '81.
Not too many years ago, however, Buck (he eschews his formal surname, Robert, even on his business cards) was selling telephone answering machines door-to-door (first for Record-A-Fone Inc., then Dictaphone Corp.) and trying to keep himself afloat after a long and not very profitable stint in the ski-boat business. His best customers were movie theaters.
"I'd already sold 48 [recording devices] to United Artists," Wilson says, "when they called me down to Los Angeles to service another one of their theaters. This theater had 10 incoming phone lines, each of which was hooked up to a three-minute answering tape telling what show was playing, what times the screenings were, et cetera. When they wanted to change the message, though, they had to pull all 10 tapes and re-record each one, and that got awfully tedious."
If Buck Wilson hates anything, it is tedium, the mother of necessity.
"I knew there was a better way to handle this," he continues, "so I told the manager about this new machine I'd heard about that could answer all the lines at once with the same tape. 'Great,' he said, 'when can I have one?' 'Two weeks,' I said. We shook . hands on the deal. There was only one slight problem: The machine I'd described didn't exist. I had to invent it."
Invent it? No sweat. In the army during the Korean conflict, Wilson was assigned to duty with an Espanola, N. Mex., National Guard outfit that couldn't hit a pine tree with a bazooka. He recomputed the firing equations, blew a target drone out of the sky with his first shot, and won himself 16 months in radar school. This gave him the basic confidence he needed to sell equipment that existed nowhere but in his own rich imagination.
"Yeah," he says, "and my phone machine worked great, too. Not long after that I was visiting a doctor's office. He had five incoming lines and one nurse to answer all five, plus do all her other stuff. So he asked for a tape that would tell the caller that the office was busy and would he please wait until someone was free. I said I'd heard of something even better than that." A puckish grin forms, as he remembers how a new invention came into being. "I said I knew of a machine that would not only answer all lines with the same tape, but would also put the calls on hold and prioritize them in the order they came in. 'Super,' said the doctor, 'how much will it cost me and when can I have it?' 'Fifteen hundred bucks and 30 days,' I said. I got John Giordano [now AEC's vice-president in charge of engineering] in the lab, and we wound up designing the basic circuitry for the first automatic call sequencer ever named and patented. Took the $1,500, put it toward enough parts for 10 more machines, and we were off and rolling."
At first it was a bit of a slow roll. Although he had virtually cornered the market on low-line, high-traffic users, Wilson learned the hard way that Pacific Telephone & Telegraph Co. took a dim view of his adding AEC accessories to telephone-company hardware without authorized connecting devices.
After several minor run-ins, the strained relationship reached its nadir when, at four o'clock one busy Friday afternoon, the phone company shut off all service to a five-theater United Artists complex in Sacramento that was one of Wilson's best customers. Much screaming ensued, some of it overheard in a conference call by William Johnson, an acquaintance of Wilson's and executive director of the California Public Utilities Commission. Johnson threw in a few choice words of his own, and before long the CPUC had opened hearings on AEC's petition to allow direct connection of customer-owned paraphernalia to Pacific Telephone equipment.
In short order the CPUC ruled that such connections were perfectly legal -- provided independent lab analysis showed the installation did no harm to existing telephone-company equipment. Wilson and his company had the inside track with the fanciest wheels on the racecourse. A year later, 1977, when the Federal Communications Commission adopted California's new regulation and applied it nationwide, AEC was truly off and zooming.
"We did $300,000 in '77," says Wilson, "and about $1.3 million the next year. It was that ruling that really broke us loose."
AEC has since profited heavily from concentrating on product innovation and customer service. Wilson conducts 6 to 10 technical-training seminars a year to familiarize his customers with new equipment, plus several more to consult with them on their own changing needs. ("It's their problems we're in business to solve," he explains, "and they know them better than we do.")
The result of Wilson's efforts is a line of sophisticated, reliable equipment offering an impressive array of services. With the AEC Model 1101, for instance, such high-end users as airlines and hospitals can check regular computer printouts for upto-the-minute data on calls received, answered directly, sequenced, or abandoned. They can quickly ascertain the average delay time before callers hang up, and they can graph the individual line usage on as many as 64 incoming lines or trunks. Kaiser-Permanente Medical Centers, the huge hospital chain based in California, was impressed enough with AEC machines to order about 400.
AEC's biggest customers, however, have been telephone operating companies, which accounted for 65% of its sales in 1982. That factor caused some recent strain in the sales charts. Last year, 14 Bell operating companies sold AEC products to end-users -- right up until January 1, 1983, when an FCC ruling stated that the companies could not purchase new equipment for lease to customers. Although Ma Bell was still allowed to buy sequencers for internal use, general AEC sales to the telephone companies fell from almost 50% of sales in mid-'82 to a mere 17% in the first quarter of this year. Even with six months' notice of the impending decision, the company was hard pressed to come up with a fall-back marketing strategy. "When a very large user suddenly stops using your product for whatever reason," says Wilson, "you've got to scramble."
Wilson moved to take up the slack by concentrating on selling to dealers and retail customers (AEC has 11 regional managers among its 135 employees, with direct sales offices in New York, Los Angeles, Houston, San Jose, St. Louis, and Washington) and by cutting his manufacturing workweek from five days to four to keep inventories lean. Anticipating another sales spurt when Amercan Telephone & Telegraph's divestiture is completed -- early in 1984 -- Wilson says, "Would I have positioned us differently [in the marketplace]? I don't think so. All we could have done was be more aware of an alternate plan. As it is, we'll wind up with many major customers, not just one."
Wilson has been busying himself lately with plans to take AEC public, perhaps as soon as the fourth quarter of this year. A projected sales boom early in '84 wouldn't hurt the offering. Neither will AEC's past profit record.
"Moving from private to public changes our whole emphasis," he admits. "When you start a company, your whole thrust is to make a profit while paying the least possible tax. Obviously, then, you want to show as little profit as you can. But when you go public, you have to flip that around and show the maximum profit, not the minimum. We're fortunate because our growth and our profits have been good, and we've accomplished that with virtually no debt. This has really been a bootstrap operation."
Wilson, who admits the one aspect of going public that concerns him is having to perform for stockholders ("I don't take criticism real well," he says), may be wearing some fancy new boots by the time the offering goes through. With 90% of AEC's equity in his family's hands (John Giordano has the other 10%, and Wilson is putting up 10% of his own holdings for an employee stock option plan), Wilson expects AEC stock to fetch as much as 60 times current earnings. That should be enough to put him in new golf shoes, too, which will come in handy: Golf has become his and his wife Colleen's major passion since they bought a public course in Fresno County last year. It is a rare weekend when the Wilsons' little Piper Navajo doesn't land near the 10th fairway.
"I wasn't much of a golfer before I bought a golf course," he says, "but I sure as hell am one now."
Necessity will do that to you.
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