Avistar expects 1st annual profit
By Richard Lee
January 29,2009
Staff Writer

Stamford resident Simon Moss, cheif executive offiver of Avistar Communications Corp., last week demonstrates a conference call with co-workers in London, New York, and Singapore. He took the position in January 2008 and the company, which makes software for video communications, expects this month to celebrate its first profitable year. (Kathleen O'Rourke/Staff photo)

Simon Moss knows potential when he sees it. The Stamford resident had the ability to turn around the fortunes of Mantas Inc. as its chief executive officer and see it sold in 2006 to I-flex solutions, a unit of Oracle, for $122.6 million.

Now Moss, who was named CEO of Avistar Communications Corp. last January, said he expects this month to celebrate the first profitable year for the San Mateo, Calif.,-based software development company since it was founded in 1997.

But getting there required some traumatic changes -- such as changing the company's product line and replacing its sales staff with a global distribution strategy.

"I took over the company in January 2008 when the stock was in the 20-cent range. We were relying on UBS and Deutsche Bank. We had a product based on hardware. They built a good product, but it was inefficient," said Moss. "Now, we're the highest-performing technology company on Nasdaq."

Avistar shares closed Wednesday at $1.06, up 6 cents on the day. Moss said he is a shareolder of Avistar, and also held shares of Mantas, which developed software that prevented money laundering.

As the new CEO of Avistar, he "realigned" the management team, bringing in individuals who had worked with him in the past, and he moved software development responsibilities from the United States to the Ukraine, contributing to a 40 percent cut in costs. He refocused the business model on product sales and licensing to boost its revenue.

In the process, Moss, 43, cut the work force from 110 to 53. The company, which now specializes in development of desktop video communications software, eliminated its direct sales team and contracted with a network of resellers and distributors, resulting in a global roster of clients.

"We're looking at signing as many resellers and distributors as possible. We diversified our go-to-market strategy. IBM is embedding it (Avistar software) into its products. That's created significant growth for us," Moss said, crediting his staff for the turnaround. "We expect to grow our revenue by 75 percent this year despite the slowdown."
Moss said he expects net income of more than $2 million this year and revenue of $14.9 million. The company reported a net loss of $231,000 in the fourth quarter of last year, a vast improvement over the loss of $3.7 million for the same period of 2007. Adjusted earnings before interest, taxes, depreciation and amortization for the quarter, a key metric for the management team, showed a $591,000 profit, compared with an EBITDA loss of $2.9 million in the fourth quarter of 2007.

Revenue was $3.1 million for the most recent quarter, compared with $1.9 million for the same quarter in 2007.

Companies that bring in a new management team often experience a turnaround, said Roger Aguinaldo, chief executive officer and publisher of Mergers & Acquisitions Advisor.

"Fresh management looks at a company in a different way. He (a new operator) will do whatever he can to make a return on investment," Aguinaldo said. "The key is leadership and getting the right people in."

Although Avistar's future this year looks bright, it faces competition from some major players in the sector, including Polycom, Tandberg, Lifesize and newcomer Vidyo, according to Robert Mason, an analyst with Stamford-based Gartner Inc.

"The overall market opportunity will also continue to be diluted by 'consumer' solutions like Skype," he said. "Avistar needs to accelerate HD (high-definition) capabilities across the product suite and show more partnering activity with established telepresence players."
The sector has potential for growth as executives seek more opportunities for communication, Mason said.

"High-end desktop video is attractive for extending the reach of executive videoconferencing to a select subset of individuals while controlling quality and providing a repeatable experience," he said.

The cost of an Avistar product is equivalent to the expense of one U.S. domestic commercial flight, according to Moss.

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