GatesAir CEO Sets Sights On Repack, Beyond

Not surprisingly, the top priority of Bruce Swail, new GatesAir CEO, is meeting the demand stemming from the TV spectrum repack with the company’s second-generation of solid-state, high-power TV transmitters.

While Swail says the repack is “front and center” for the company at a high level, there is “a list about a million bullet points long” of details that must be addressed to scale the company’s operations to meet the surging repack demand.

Swail, who has served as CEO of two private-equity-funded companies — Ulticom Inc., a telecom signaling solutions manufacturer, and data communications technology maker US Robotics — took over the top spot at GatesAir in July from Phil Argyris who has served as CEO since August 2014.

In this interview, Swail discusses why he joined GatesAir, the challenges of the repack, the role “adjacent spaces” may play as it seeks out new markets, how to manage the capacity ramp-up needed to meet the demand of the repack and whether or not private equity company The Gores Group, which closed its purchase of Harris Broadcast in 2013, brought him in to prepare the GatesAir for a sale.

An edited transcript:

What attracted you to GatesAir?

As I learned more about the opportunity and the company, I got pretty excited actually because I could see that the next few years for the company are going to be pretty exciting. I like the fact that the company has a storied history and done a lot of pioneering activities so I appreciated that.

It resonated with some of my Motorola days of companies that did things that were first-in-the-world kind of things, which is always fun to participate in.

The final aspect for me is the company is private-equity-owned, and I’ve twice been a private-equity-owned tech company CEO. I know the world of working in private equity. I came off two quite successful opportunities there. I felt it was definitely in my wheelhouse.

You step into the CEO role at GatesAir as the company’s business will likely see dramatic growth with the spectrum repack shifting into high gear. What challenges does this accelerated growth pose?

We’re certainly going to be very busy, but it is busy for all of the right reasons. It is a tremendous opportunity. We are planning and expecting to participate heavily in the repack activities. We are the largest supplier in this space. We are a made-in-the-USA company. We’re pretty proud of those facts.

We have a new product that has come online for the transition. This is our second generation of solid-state transmitters for this market. We feel we are very well positioned.

But under those statements is a list about a million bullet points long of preparing operations and all of the details of being able to scale.

I do come from an EMS [Electronics Manufacturing Services] industry at Flextronics where I ran about $1.5 billion worth of manufacturing capacity [as an executive] for the company. So, I am pretty familiar with scaling capacity.

We are going to be very operations-focused and customer-focused where we are listening to our customers and bringing the right solutions to them.

We are also going to be very focused on those final activities around our products to make sure they are going to be delivered on time — that they’re the high availability we expect them to be and highly competitive.

The Gores Group completed the acquisition of Harris Broadcast in 2013. A 2015 review of private equity firms found an average holding period of about five-and-a-half years. That would be about a year from now if the average applies to GatesAir and The Gores Group. Is that what’s on the horizon GatesAir? Are you there to help the Gores Group execute a sale so the owners can cash in on their investment?

No, absolutely not. I was brought in to succeed a longstanding CEO [Phil Argyris] who is quite distinguished in the industry and to move the company forward through a very exciting growth phase.

The reality is when you are owned by private equity, the for-sale sign is always up. The company might get sold tomorrow, or it might not get sold for 10 or 15 years.

You did mention the average, but you didn’t mention the standard deviation. As with all statistics, there are exceptions to the rule. So, I can tell you there is no discussion of a whole horizon with ownership. We are just here to optimize the business, be as profitable as we can and grow as much as possible.

I’ve been to the GatesAir Quincy factory and seen some of the preparations to meet the repack demand. I couldn’t help but wonder what the company’s strategy will be once the repack is complete and demand returns to normal levels. Is that something on your radar at this point?

We are always mindful of it. We are looking at how to flex up our capacity in a manner that allows us to address the peak that should be in the next 12 to 18 months — when we expect the peak orders to flow, and we’ve got a lot underway.

Our newer products are more streamlined and modular and suited for this kind of environment, and we have the benefit of a product strategy that is better aligned to this reality. We also will selectively outsource portions of our production when we run out of capacity in certain areas.

But we have a lot of idle capacity that we can bring to bear on this as well. We really haven’t been running multi-shifts at the factory for a while. And the volumes we are talking about getting back to are the ones the company has achieved before. So, it’s not unfamiliar territory for some of the employees who have seen a lot of business cycles come through.

Of course, we still have the radio business. We tend to get focused on the shiny object of the repack opportunity, but we still have a nice run-rate business in radio and TV globally. That helps smooth out demand a little bit. So, we are basing it on a run-rate business plus repack scenario.

You came from tech companies that provided software-based solutions for mobile service providers that have helped them with the rollout of 4G LTE services. Will mobile network operators become a target market for GatesAir?

That’s possible. I think I am in the learning phases of what our best scenarios are. But as you know over the last several years, there has been a blurring of these industry lines, and it all happened many years ago when broadband providers and telephone companies got blurred and they were allowed to compete in each other’s space. Then [there was] the advent of mobile carriers, and now you hear broadband carriers and over-the-top solutions on the content side.

That’s a direct result of a highly competitive market with a ton of innovation going on. So, to the extent that we participate here at GatesAir, ATSC 3.0 might be a critical mechanism to help enable these types of movements from a very traditional broadcast role to a very segmented narrowcast model where they are target marketing regionally and demographically. We think we have some technology that will help do that.

We all know the spectrum crunch for mobile carriers, and they are offering a lot of these all-you-can-eat services. So, the ability to offload some of that traffic onto more of a broadcast model will always be attractive for a mobile carrier. The exact form and function of how we participate will take some time to develop. But that is certainly something we would aspire to do.

Lastly, what are the highest priorities on your to-do list? Obviously, there’s the repack, but are there others?

I wouldn’t be truthful if I didn’t say the repack was front and center because it’s imminent for us. It takes a lot of my time right now making sure we get the products ready and they are fully fleshed out — that our production capacity is in place, that we are engaging our customers properly so we drive the order flow and, ultimately, the orders through our factory to delivery. There’s a lot to do there.

That’s where our main attention is, but we are also thinking about adjacent markets we can participate in the longer term. We do have a core competency of very high-power transmitters with world-class capabilities, so we are always thinking about where else can that technology be applied beyond traditional markets and to expand and diversify, perhaps, from our core base.

We won’t be reckless. We will look at adjacent spaces where there’s logical application of our capability,

Any adjacent spaces you can identify?

There are a couple we are looking at, but how about we save that for the next time we talk.

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