NetComm grows ADSL sales

Communications gear vendor NetComm has multiplied its net profits by four to $1.13 million for the year ended 30 June, based mainly on increased sales of ADSL equipment.

David Stewart, managing director at NetComm, said demand for ADSL products had grown to represent 38 percent of the company's revenue for August, up from six percent of revenues in the same month last year.

'That figure is per month and each month is getting bigger and bigger. Each month we're seeing significant growth in ADSL modem sales,' he said.

Stewart said the growth probably reflected increased marketing of ADSL by ISPs, stronger competition, and better customer awareness of the product range.

'The plans that people are offering now are much more affordable. Only last year they were talking $100 a month, and people were saying 'no'. But now it's $69, $79 from various players,' he said.
Stewart expected the growth to continue strongly for the next four to five years.

'I think it's the tip of the iceberg ... I would estimate that the retail market is, as I think was quoted by Telstra, only at six percent penetration,' he said.

The push for ADSL had followed several years of flat growth in what had become a stale market, he said.

'We've had a few quiet years since 56kbp/s came in, and then just a couple of years waiting for ADSL to take off,' Stewart said.

Broadband's advent had moved the market from a position where simply buying a PC and a modem was enough for customers. Today, customers needed to buy a whole range of associated products to take advantage of the latest technologies, he said.

'Now they want a router, a switch, ethernet cards, firewalls and so on. So we get multiple sales from the same customer,' he said.

Stewart said NetComm's good results were also down to increased sales and marketing, including appointments of three staff in sales and one in marketing, introduction of 15 new products in the last six months and small but increased sales in the US via US integrator Telenetics.

As a result of the increased net profits, the company had declared a fully-franked dividend of 0.5 cents a share to be paid to shareholders on Monday 1 September, he said.

'We forecasted 0.5 to 0.8 cents and we exceeded our [profit] forecast and we're giving 0.5 cents because we love our shareholders and using what's left on growth,' Stewart said.

He said the company had 'steadily' retired the $1.5 million it had borrowed on arranged $3 million of bank facilities. The company now had no bank debt and was cashflow positive, he said.

'We've got $1 million in the bank. This is chicken feed if you're a big company but for a smaller company that got affected by the tech wreck, that's pretty good,' Stewart said.

NetComm shares have gone from 7 cents each in recent months to 21 cents Friday 29 August on the ASX. Stewart said the company was releasing an ADSL-in-a-box product mid-October including VPN, 802.11g wireless access, ADSL modem, router, switch and a firewall.

'We haven't seen anybody offering such a comprehensive device,' he said. Customers could also look forward to VoIP and SHSDSL - a type of symmetric DSL - offerings from NetComm in the near future, Stewart said.