Eileen Peco, Ameritech's director of business development, views SoloPoint's PCM as a complement to existing network services, not as a competitor. "We don't have the sophisticated call-routing capability that is inherent in the box," she says. "The other reality is that there's a market that wants a desktop solution. We feel we can provide small-business customers with both." That's just one of many potential benefits to Ameritech. By putting its own name on SoloPoint's PCM, Ameritech hopes to build customer loyalty. Also, to take full advantage of the PCM's capabilities, besides two lines, users will want voice mail and three-way calling, both high-margin services Ameritech can sell. Finally, because the PCM allows cellular users to accept incoming calls even if they're uncomfortable publicizing their cellular number, it may increase cellular traffic -- a bonus for cellular-service providers, like Ameritech.
SoloPoint plans to supplement its deal with Ameritech by selling a version of the PCM directly to consumers through a computer-telephony catalog called Hello Direct, which targets SOHO workers. And it will go after at least one well-defined subset of SOHO workers -- real estate agents -- with a limited direct-mail campaign. But only Ameritech and distribution partners like it have the marketing clout SoloPoint needs right now to establish a revenue stream early and -- just as important -- to generate feedback from users.
"No product hits the market perfectly aligned," McKendry says. "Ninety percent of the people will use two or three features constantly. Once you learn what those features are, you have to allow enough time to make them a bigger presence in the product and diminish the ones that only 10% of the people are using but that end up generating 40% of your technical-support load because they're hard to get at."
There's also a margin issue. The Baby Bells can't take SoloPoint as far as it wants to go -- together all seven by themselves probably represent only about $15 million to $20 million in potential sales, according to Styres -- but they can play a critical role early in the game, while SoloPoint's gross margins are still too thin for the start-up to market extensively on its own. McKendry says his cost of goods sold is nearly 50% higher today than what he would like it to be. As that cost comes down -- through design simplification, offshore manufacturing, and higher-volume production -- then SoloPoint can begin to move product through more expensive distribution channels, meaning general retail. If all goes according to plan, four years from now the line representing PCM sales in high-volume retail outlets such as Staples and OfficeMax will soar and lift earnings with it. Meanwhile, McKendry hopes, the PCM will become a whole lot smarter: maybe with electronic-mail, fax-sorting, and video functions built in, maybe with its essential technology compressed into a single chip that comes preinstalled on the motherboard of your computer or inside your telephone. "The goal of the company in the early business plans was to be the entry point of communications into the home office," says McKendry. "Nobody else has taken that position."
* * *
Before Solopoint can become the Intel of computer telephony, it must prove it can succeed at selling stupid phone tricks in a box. Last fall, with about 100 beta units in the field, the feedback was encouraging but as ephemeral as the results of preelection polling. Soon, however, McKendry and his colleagues should be poring over actual early returns. The PCM was scheduled to debut this month, appearing in Hello Direct at the same time Ameritech would begin inserting sales literature in its SOHO customers' phone bills.
SoloPoint's financial projections are wildly ambitious for a company that's lived nearly three years with no revenues. The charts call for $4 million in sales of the PCM this year, mostly from the Baby Bells and cellular partners; $27 million and a small profit in 1998 as retail sales begin to kick in; $75 million and a large profit in 2000, when retail sales are projected to explode.
McKendry's spoken goals are more modest. "I feel pretty good knowing there are 100 units in production and people are saying good things about them. But you can get to 100 just talking to people you know. When we can get 1,000 units in service -- early in the first quarter -- that will mean we've got distribution moving. When we get to 10,000 -- by the middle to third quarter of 1996 -- that will mean we're really poised to go for it, that we've sorted out our business and our manufacturing processes and we're able to shoot these things out like popcorn."
Will the dogs eat popcorn?
EXECUTIVE SUMMARY
Company: SoloPoint Communications, in Los Gatos, Calif., founded by engineer Martin McKendry, formerly at FileNet, with initial backing from venture capitalist Charles Bass, cofounder of Ungermann-Bass
Concept: Chose a market first -- people who work in small and home offices, known as SOHO workers; then developed a product -- a telephone switching device that helps SOHO workers manage incoming communications. Objective: to be the entry point of communications into the home office
Projections: $4 million in revenues in 1996; $27 million in 1998
Competitive advantage: Enough time (three years) and capital (from Bass and his friends) to develop a market-oriented product and a well-planned launch; a potent distribution partner (Ameritech)
Hurdles: To increase margins and convince SOHOs that improved communication management can come in a $379 box
THE FOUNDER
Martin McKendry, age 41
Family: Married, with three children
Personal Funds Invested: $2,200
Equity: 13%
Salary: $130,000
Entrepreneurial Roots: Financially independent at 17, married at 20; ran a business with his wife, preparing high school students for the New Zealand equivalent of the SAT, before emigrating to the United States, in 1978.
