Dialogic sees Homeland Security revenue offsetting its hurricane losses

04-06-2006 3:08 PM — Despite a recent $590,000 loss of revenue from customers in six Louisiana parishes due to Hurricane Katrina, Dialogic Communications Corp. (DCC) is nearly "back in our growth pattern, again," CEO Gene Kirby said today.

He told NashvillePost.com that he remains determined to identify a publicly held company to acquire DCC. He explained that no other course of action seems likely to afford his 110 stockholders adequate return on investment, ease of exit or ability to track the company's performance. He said Morgan Keegan remains under retainer with DCC, in pursuit of the perfect buyer.

Kirby emphasized that achieving and sustaining "hockey stick" rates of growth by buying smaller firms would require a war chest of $25 million to $40 million or more, and raising that level of capital would be as burdensome as seeking a public buyer, particularly after factoring in the dilution of shareholders' ownership that would result. Meanwhile, he said that as the largest player in the relatively new emergency-notification space, Dialogic hears from a steady stream of suitors, adding "we got two in one day, about two weeks ago."

Kirby, 62, said DCC remains the "Big Dog" in emergency notification, logging more than $20 million in revenue annually from roughly 2,000 customers, making it "five to ten times" larger than any competitor. He said 2004 and 2005 fiscal years were "more flat looking," but those results respectively translated into the company's "best" and "second-best" years since its founding in 1982.

Kirby says Dialogic's core business has experienced great momentum each time a major national threat has occurred. He cites among flashpoints not only the 2001 9/11 terrorist attacks; but, also Y2K; military downsizing that led to need for force-multiplying communications; environmental crises; and Hurricane Katrina. Said Kirby, "I think we're sensing some business begin because of the pandemic fear," particularly in Europe.

He said he believes Dialogic's growth will accelerate as the nation's Homeland Security spending achieves levels that most observers thought would have been reached sooner. Homeland Security funding is most likely to be available in the most densely populated cities and in less densely populated areas in which local and county governments are collaborating to create regional systems.

He added that the roughly 50 percent of DCC's business that entails serving corporate, rather than government customers, represents strong additional leverage for growth. Apart from emergency notification, Kirby said services to cable-television system operators, which were the cornerstone of the firm at its founding, seem likely to grow from their current 11 percent to 15 percent share of DCC revenue. Also, DCC cable technology, including its Frontwave product, can be repurposed to serve customers in other sectors.here.)

Kirby says DCC's attractiveness to potential buyers should be enhanced by the fact that DCC emergency communications technology is the only such recommended by Microsoft and Hewlett-Packard. (Earlier story,