Deal Radar 2008: Telanetix

Telanetix is a communications service provider which offers telepresence and VoIP services to businesses. The company was founded by Thomas A. Szabo, Rob Arnold, and Bob Alford in 2001 and is headquartered in Bellevue, Washington. The trio had previously worked together on digital distribution provider Digital on Demand and multimedia solution provider RedDotNet (both of which were later sold).

Telanetix offers telepresence packages that are practical and aimed at fostering corporate interaction and collaboration across nations. Unlike its competitors, whose systems can have very demanding room requirements, the company has solutions that can fit into an existing room, thus increasing deployment opportunities with enterprises. The software requires a lower bandwidth of 1 MB per screen to operate and has a bandwidth shaper to stabilize a drop in bandwidth and ensure a smooth session. Moreover, when new features are released, clients receive the updates via the network.

In July 2008, Telanetix launched a new product with Costco Wholesale, a national and international operator of membership warehouses. The Access Line Division of Telanetix will offer a combined business phone service and business phone system package to Costco’s membership. The package is aimed at small businesses, those with five or fewer employees, which represent over 60% of all registered businesses in the U.S.

But what makes Telanetix’s business model attractive is its pricing. While its competitor Cisco charges $300,000, Telanetix’s telepresence systems are priced between $40,000- $175,000 (depending on the application chosen). Telanetix is targeting the SME market segment with its relatively affordable telepresence packages.

The company, whose customers include Mercedes and Kaufman Brothers LP, added more names to its list in 2008. In August, St. Vincent’s Catholic Medical Centers of New York selected Telanetix for a number of their organizational applications. In April, Telanetix signed a $2.5 million two-year contract extension with call tracking and analytics provider CallSource. In January, Telanetix announced the installation of its Digital Presence products in four medical facilities affiliated with a major university. The installation of the products will make it easier for field specialists and consulting physicians to teach and provide consultations remotely, but in real time and with lifelike interaction.

In July, the company appointed J.D. Vaughn as vice president of Worldwide Telepresence Sales. Prior to joining Telanetix, Vaughn served in leadership roles in a number of companies, including vice president of sales for the Americas at Polycom.

In June, the company replaced all its outstanding convertible debentures (aggregating to $10.8 million) and all shares of its outstanding Series A preferred stock (with a stated value of $15.3 million) with six-year, interest-only, non-amortizing debentures with a principal amount of $26.1 million. The company increased its debt by another $2.0 million in August, raising the principal amount to $28.1 million. Interesting and decidedly non-traditional financing model!

The company’s revenues increased 4.5% over the quarter, to $8 million from $7.7 million, with gross profit of $3.7 million. Annual revenue run rate is in the $30-$35 million range.

As you know, I am a huge fan of online collaboration and a huge un-fan of business travel. I am delighted to see so many companies tackling the online collaboration problem and gaining traction. Hopefully, in the next decade, we can reduce business travel by 75%, eliminate ALL gratuitous travel, but at the same time, improve collaboration in a big way by taking advantage of technologies such as Telanetix.

This segment is a part in the series : Deal Radar 2008