Edmund Ho is ringing up the revenues with VoIP and the development of Ascalade Communications Inc.
VoIP – Voice over Internet Protocol, for the uninitiated – isn’t a household term yet, but developing gadgets that will help it become one has propelled a Richmond company to its first showing on BCBusiness’s Top 100 public companies list at No. 40. Ascalade Communications Inc. is one of a number of B.C. companies that see a future in VoIP, which allows telephone calls to take place via a broadband Internet connection. Telus Corp., PMC-Sierra Ltd. and Peer 1 Network Enterprises Inc. are also pursuing opportunities in the sector, which is transforming the way people and businesses stay in touch. How big is the transformation? U.S. telecom research firm Infonetics Research Inc. estimates that the number of VoIP users in North America will climb to 24 million over the next three years, while one of the best-known international providers, Skype Technologies SA of Luxembourg, is approaching 60 million registered users. And here’s where Ascalade comes in. Skype has contracted the Richmond-based company to supply the gadgets that will make it easier for consumers to talk to each other using this new technology. For Ascalade founder and CEO Edmund Ho, the match is a no-brainer. Ho, 58, cut his teeth as a design engineer with Philips in Hong Kong in the 1970s, where he was captivated by the interplay between technology and product design. “I was fascinated by wireless, by the designs as well as all the features,” he says. He became a senior lecturer in electrical engineering at the Hong Kong Polytechnic University in the mid-1970s and taught as a senior lecturer in electronic engineering for 13 years. When he immigrated to Canada in the late ’80s, he helped set up the Richmond office of Hong Kong-based VTech Holdings Ltd. During the five years he spent at VTech, Ho led the research team that developed the first 900 MHz cordless phone. The discovery was a great advance: the shorter wave frequency gave cordless phones a greater range and permitted design improvements users found appealing. “It was a big revolution in terms of the theory and concepts,” Ho explains. Now, Ascalade is doing for VoIP what it did for the cordless phone. The big coup came when Microsoft’s Bill Gates was spotted with an Ascalade handset; the implied endorsement garnered the company huge credibility in the industry. Ascalade began life in 1993 under the name Arkon Technologies Ltd. (it was renamed Ascalade in 2004), when Ho set up shop designing cordless phones and contracting out production to a manufacturer in China. In 2000, manufacturing came in-house. “From 2001 onwards, we changed our business model from simply a design house to a product company,” Ho explains. “Customers want a very cost-effective product and they want very precise control over time to market, and if we had to work with a third party it would be very difficult for us to control that.” Arkon set up a 240,000-square-foot manufacturing plant in Dongguan, China, which now employs 2,200 people and began building its customer base in Europe. Sales took off. Last year, revenues totalled $135.5 million, a 24-per-cent increase over the $108.9 million in sales rung up in 2004. Last month the company announced it’s building a US$17-million factory in Qingyuan, China, to increase its manufacturing capacity by 40 per cent. “We took the initiative to work with our customers by introducing product ideas, and we even work together with them to manage the product lines and even to develop new markets. So we [take] more initiative in leading the business,” Ho says. Ho attributes last year’s loss of $740,000 to costs related to preparing for the company’s $40-million IPO on the TSX. In 2004, Ascalade recorded a $1.4-million profit Ho doesn’t dismiss last year’s loss lightly. “As a public company we have to improve our profitability. We have to improve our shareholders’ equity,” he says. To do that, Ascalade continues to expand its offerings from digital cordless phones to digital wireless conference phones and baby monitors, as well as VoIP products. It employs 185 people at design and development offices in Richmond, Hong Kong and China. The new line of products seems to be working. In the first quarter of this year, Ascalade sold US$1.3 million worth of its VoIP phones and racked up total sales of US$22.7 million. Revenue from its deal with Skype is only just beginning to come in, but analysts are cheering the company’s prospects. With eBay’s purchase of Skype poised to take VoIP to the mainstream, Ho’s 31-year-old son Brian, Ascalade’s VP of business development, is optimistic about future growth. “There will be a number of new hardware devices that will be entering the home market that will enable people to use Internet telephony in a new way,” he says. Ascalade is ready to design them. Related Stories: Top One Hundred Overview 2006 Biotech Breakthrough Vertical takeoff