Brightstar's role in Motorola's tremendous surge was unmistakable. It was the biggest and most sustained growth Motorola had seen anywhere in the world--in Asia and Europe, in fact, Motorola was either losing ground or negligibly gaining. Latin America had become such a triumph for Motorola that, in an unprecedented move, it invited Brightstar to become one of its major distributors in the U.S. as well. Within 10 months, Motorola was already seeing a 24% increase in the number of phones it was shipping throughout the United States.
"The secret was," Marcelo says, "that I changed the rules of distribution."
Marcelo was smart enough to outthink the risk.
Three hours, 45 minutes...
"Well," VC 2 says politely, "we don't really do much with distribution companies."
He's got good reason: Based on market principles in general, and what they know so far of Brightstar in particular, middleman investments smell like risky business. Distribution is notoriously hazardous because the companies rarely own a product, or intellectual property, or even assets; all they have is a system, which any competitor can copy and use to lowball away customers. Worst of all, they're symbiotic creatures linked to other financial organisms, so their existence depends on the performance of the manufacturers they buy from and the customers they sell to. These are factors they can't control, so if either runs into trouble, the first bit of fat they'll look to cut is the middle--the distributor.
"Those aren't really the projects we get involved in," VC 2 apologizes.
"Good!" Marcelo responds. "Distribution is something we do--it's not who we are."
VC 2 looks doubtful; everyone in the room knows that Brightstar exists precisely because the two worst-case scenarios that can cripple a distribution company had wiped out its competition. This is the critical moment: Marcelo has to blast away the VC trio's doubt and convince them that Brightstar isn't just better, but fundamentally different from any distribution model they've ever seen. In this instant, he has to make his point about "changing the rules of distribution." His next words will determine whether the VC guys will be listening for the next few hours or just killing time till the plane takes off. Everyone in the room feels it. Even the bankers, who've been checking BlackBerries and jotting notes, are now watching him.
So Marcelo takes off. "You guys must be getting bored with me," he says. "How about you listen to the really smart people, and I'll catch up with you after lunch?" He then yields the floor to Denise Gibson and his CFO, Oscar Fumagali. "They know the company as well as I do," he shrugs, patting Oscar on the back as he heads out the door. Suddenly, amazingly, he's gone.
That kind of quietly confident move, says Rick Darnaby, the former CEO of Somera Communications Inc., is vintage Marcelo. "He doesn't have to show you he's the smartest guy in the room by talking," says Darnaby, who signed Brightstar last July to move Somera's network infrastructure equipment in Latin America. "He shows you by the kind of people he hires and his belief in them. That's the sign of a true leader, and it's one of the things I immediately liked about Marcelo--he's wise beyond his years when it comes to managerial skills."
And so, with Marcelo pulling himself out of the game in the crucial inning, his two lieutenants open the back of the clock and show what makes Brightstar tick.
Three hours...
In 1997, the two biggest names in U.S. and Latin American cell phone distribution were CellStar and Brightpoint. Right from the gates, Marcelo and his partners weren't shy about bleeding away both companies' business in Latin America: First, they took part of each name to form "Brightstar"; then they took their customers. The relationship was filial at first; CellStar adopted Brightstar as sort of its industry gopher, using the tiny company whenever it needed a few phones on short demand. In return, it sold small batches of phones to Brightstar on credit. "We put them in business," says Osvaldo Pi, CellStar's former CFO. "We were a $1 billion company, and we gave them their first credit line." After all, what was the danger? Marcelo and his guys only had small regional offices in Miami, Brazil, and Bolivia, while CellStar was dotted throughout the world.
"But over the past three years, Marcelo has taken away all of CellStar's business in Latin America," says Pi, who left the company in 2000 and now watches Brightstar's progress with interest. "What he has done in such a short amount of time is amazing." Brightstar seized the advantage in 2000, when CellStar and Brightpoint were hit by two simultaneous storm fronts: Up north, the telecom industry had begun its slide, while down south, key Latin American countries were spinning into turmoil.
Venezuela's economy was in free fall. Argentina was close to default on external loans. Peru's recovery had bottomed out, and President Fujimori was facing ouster. No one knew what was going on in Mexico, where the government was in disarray after outsider Vicente Fox won the presidential election. Bolivia was in the midst of its worst money crisis in decades. "Everyone got scared to death," says Pi. "The telecom industry was already in a tailspin, so no one wanted to take on the added risk of doing business in areas where they couldn't be sure they'd get paid."
"That left the door wide open for Marcelo," he concludes. "When there's turmoil, big companies either hunker down or cut and run." CellStar and Brightpoint, he adds, didn't really have much choice when they chose the haul-ass option; they were public companies with shareholders to answer to, so neither chief exec wanted to stammer to the board about why he'd shipped that quarter's profits into a war zone. "Marcelo was free to take the risks that perhaps others should have," Pi says. "But keep in mind, Marcelo was also smart enough to outthink the risk and make his money while reducing his exposure."
