Steve Bloom/The Olympian
Illuminet President Terry Kremian explains the growth in the telecommunications industry and Illuminet's role in it at the corporation's headquarters in the Lacey Corporate Center.

Lacey company rings up revenue

Telecom industry turns to Illuminet for signaling help, service potential

CHRIS CLOUGH, THE OLYMPIAN

Originally published August 12, 2001

LACEY -- While dot-coms are in the doldrums and tech stocks teeter, Illuminet Holdings Inc. is dialed in.

The Lacey-based telecommunications corporation hit $10 million in income for the most recent fiscal quarter, up 134 percent from the same quarter last year.

But in the success story that is Illuminet, looking at just income is like dialing only the first three digits of a phone number. It takes a look at margins to complete the call.

The $10 million in second- quarter net income is based on revenues of $47.2 million, which is more than a 20 percent margin.

"It's staggering. It shows good management and good use of assets," said Steve Levenson, a New York-based research analyst with Gerard Klauer Mattison. "It's tough to find in this sort of business -- a company that is doing as well."

Illuminet helps carriers route calls with its computerized switching system and also connects carriers to databanks necessary for toll-free calls, caller ID and other such services.

"There isn't a phone call in the United States, wire or wireless, that we don't have something to do with -- for all intent and purposes," said Terry Kremian, president of Illuminet.

Illuminet doesn't deal directly with the end-user, but instead helps companies such as the Baby Bell spin-offs and independent carriers do a better job of managing their networks and offering more services to callers.

Illuminet's essential, yet specific, role appeals to carriers that are hesitant to team up with competitors.

"I call Illuminet the Switzerland of switching," Levenson said. "By being neutral, they have more than 800 companies as customers."

While Illuminet uses state-of-the-art technology, with hundreds of computer network servers filling room after room from floor to ceiling, the company is far from a startup.

It was founded in 1981 and became a publicly traded company in 1999.

Its initial public offering, or IPO, raised $78 million.

The IPO proceeds have been used to develop new products, to make network improvements and finance a few smaller acquisitions.

In its biggest acquisition since the IPO, Illuminet bought National Telemanagement Corporation for about $84 million in stock in June 2000. The Texas-based subsidiary focuses largely on prepaid wireless services.

The NTC stock deal left much of the IPO nest egg intact, and it has been padded with operating income.

As of June 30, the company had cash or cash equivalents of $123 million, said Dan Weiss, Illuminet's chief financial officer.

On the ticker

After an IPO price of $19, the stock briefly traded at more than $90 a share during the high-tech heyday.

In 2001, it followed the marketwide tailspin to the $13 range in spring.

In April, the company authorized a stock buyback program. Shortly after the buyback announcement, shares were back in the $25 range.

"We bought back a minimal amount," said Weiss, adding that it made good financial sense to buy back shares when they are selling for seemingly depressed prices.

Friday, Illuminet closed at $30.01 and now has a market capitalization of more than $1 billion, Weiss said.

Friday ended what has been a good week for the company, especially in terms of public relations.

On Tuesday, Roger Moore, Illuminet Holdings' CEO, opened the Nasdaq market at a ceremonial event in Times Square.

The opening honor follows recognition based more on merit.

Illuminet consistently ranks on Deloitte & Touche's list of the state's 50 fastest growing technology companies and will be on the upcoming list, said Penny Thomas, Illuminet spokeswoman.

Moore, who came on board in 1995, was a finalist this year for Ernst & Young Entrepreneur of the Year.

Moore, Weiss and Peter Wiederspan, who is vice president of finance and investor relations, used the Nasdaq opening as part of an East Coast swing to drum up interest in Illuminet.

"It was great. We made a number of presentations in Boston, New York and Philadelphia," Weiss said.

He said that "the intent of the trip is to keep the story of Illuminet fresh in investors' and potential investors' minds."

Levenson said Illuminet compares well with other telecommunication corporations such as Verizon, which has a 3.4 percent return on assets for the past 12 months and a 14.6 percent return on equity in the same period.

Illuminet, on the other hand, comes in at 17 percent and 21.8 percent respectively.

As an analyst, Levenson said he sees another good quarter ahead for Illuminet.

He expects earnings per diluted share of $0.29 for the third quarter. The First Call consensus is $0.28, Levenson said.

Illuminet is building on a years-long string of revenue growth, which has been mirrored in expansion of its work force.

Illuminet also has offices in Kansas and now employs about 200 people in Lacey, said Kremian, who oversees the company's day-to-day operations.

The company moved into the site in the Lacey Corporate Center off College Street in 1990 and space is at a premium in the three-story building.

As rooms once used for meetings fill up with worker cubicles or computers, Illuminet has moved about 30 workers to office space in Meridian Campus.

On the web:

Illuminet.

The Olympian Copyright 2001

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