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TMF Interview With Ramp Networks President, CEO, and Director Mahest Veerina
June 22, 1999
With Dave Marino-Nachison (TMF Braden)
Santa Clara, California-based Ramp Networks (Nasdaq: RAMP) is a provider of shared Internet access solutions for small businesses. The company went public Tuesday, selling 4 million shares at $11 each. Ramp Networks' primary product, the WebRamp, allows multiple users to access the Internet through a single modem, telephone line, and Internet service provider account.
TMF: Today is the day of your IPO and I was wondering if you can talk a little about the timing of your offering and the process you went through to get here today.
Veerina: Yeah, it's a big day for us and we're quite excited. The process actually started in early Q1 looking at making an offering. Then we started getting into the heat of things about March or so then we filed, and made additions to the filing in April actually. Over the last few weeks we've been on the road telling our story to Wall Street. Seventy or 80 meetings later, we priced yesterday and today we started trading.
TMF: Maybe you could give us the boiled-down version of the presentation you made while you were out on the road, sort of what you were telling people and the that you were trying to get across.
Veerina: Basically, we provide high-speed shared Internet access solutions for small offices. By small office we mean the total 50 users type of office and this includes small business, branch office type of situations. The market opportunities are really exciting. There are an estimated 10 million PC-only small offices in this country alone.... And that is driven by the 'Net phenomena and all of the Internet economy -- it's a global opportunity. So that's the first key message -- large opportunities.
Second key is we have built a solution ground up to address the needs of the small office by bringing high-speed access and providing a variety of applications to the small office for the desktop. We've been extremely successful at doing that. We've shipped over 50,000 units exiting '98 and we built a large national network of 4,500 resellers to resell our solutions and design these solutions. So, we've been extremely successful at that. That's the key next piece and then we've been expanding internationally, a huge opportunity. We have a real early presence in Europe and Asia -- we don't even touch Japan and South America yet, and again, big opportunities there. So that's the next key part.
"We have a real early presence in Europe and Asia -- we don't even touch Japan and South America yet."
Then we partnered with a number of service providers and OEMs like IBM (NYSE: IBM), Gateway (NYSE: GTW), Compaq (NYSE: CPQ), which is good, and a number of national, PPPs (point-to-point protocols) like Cable & Wireless (NYSE: CWP) UK and so on, so there are some key partnerships in the service provider space.
So these are all of the key elements that make our story exciting.
TMF: With so many well-known and widely available alternatives for Internet access, what would be the competitive advantage for yours?
Veerina: Good question. Why are we competitive? Our main claim to fame is the features and functions and the applications we bring in a platform. And more over we are the only one that does that. You could go out and by a router to connect you to the net, but with our solutions, you could create applications from the office relative to your private networking, security, firewall aspects. We are the first ones to bring fax integration into the office so you could plug your fax machine in and now your fax pages can be transmitted on the 'Net.
So these are types of applications that Ramp is the only company that makes them.
TMF: How and where do you market your products? Are your products marketed primarily through your distributors or do you also market them yourselves?
Veerina: We it do both ways. We use our national resellers channel as a primary channel and what we do is we focus on getting the message to resellers, really, to go off and design solutions. We have an inside/outside sales team of about 18 people that work with the computer resellers to get awareness into the customers.
TMF: In your prospectus you talk a little bit about how difficult it is to project revenues because of the many different ways that you sell your product. Do you have any plans in mind to try to figure out how to try to increase visibility? Do you think perhaps online sales is one way to do that?
Veerina: Definitely. Online sales are a small portion of our revenues today, but primarily once we go beyond basic shared access with VPNs (virtual private networks) and other security solutions we do need a WAN (wide area network) reseller to design the solutions. So in terms of our predictability and revenue and all, 80% of our revenue flows through this distribution channel and we get a pretty good historical look at what the numbers are in the channel. We get weekly point-of-sales reports from our distribution partners. So we get good visibility into what's happening and how the sell-through is.
TMF: What is the approximate life span of one of your WebRamp products?
Veerina: Our typical customer is Main Street America, like a 15 to 20 user type of shop. Typically our solutions cost $500 to $1,500 and the way you get to $1,500 is by adding more and more software value adds. And the life-span -- for typical customers the price is a $700, $800 type of solution and it depends on the usage. It could be for life, or if your LAN is a fairly small region all they get is a phone line to their access; then later, if they decide DSL is available, they can move up. It's not a huge investment. The ROI is like 3 months to 4 months or less so they can toss this box, buy a new unit with DSL.
TMF: How about in terms of upgrades from your side?
Veerina: Actually a lot of the feature that we introduce like the security, the fax or IP, the VPM capabilities, these are fairly new additions in the last three to six months in our product portfolio. So we have to have the upgrade type of path on our product. We do see remote access, which is more in play in our products about a year or so. We do see quite a few customers that start with basic, shared access to the 'Net and decide well, I have two traveling salesmen, I need the RAS function now so they can get back into my office LAN. So we are talking really moment to moment.
TMF: Who do you really consider your primary competitors?
Veerina: We see 3Com (Nasdaq: COMS) but we continuously win because of our product's features and function. And 3Com provides, really, two-point solutions really in this space and we have a wide variety of features and functions in the product.
TMF: It sounds like consumers see a lot of differentiation between their choices. Do you believe that that will continue or will remain? Or will the main impetus for a purchase eventually become price?
Veerina: It's not a price type of competition today. It again goes back to our features and functions. Again, we are addressing not the consumer market but the small office with a median size of 20 users to 25 users. So what happens is layered below us in the huge multi-PC home consumer market; that's where it's more price-sensitive and we differentiate through value-add and the features and functions. We don't see price pressure today.
TMF: Can you talk a little bit about your branding efforts?
Veerina: Sure. Again, as a small company we don't have deep enough pockets to do very horizontal branding. What we have resolved to do to date is first and foremost [use] the feet on the street as our channel. There's 4,500 resellers that we have. So we go in and train them and brand into them that when you think of small office Internet solutions it's Ramp. So we do that.
And the second thing that we are starting to do is find some work that goes within the small office space. Like if you go to our website you'll see there's a -- we have a deal with Lexus/Nexus and the legal folks. There's 400,000 small law firms in the country so we advertise into the legal magazines and we get exposure on the vertical. And we do some amount of Web-based advertising as well.
"We are investing in expanding our channels both domestically and internationally."
TMF: Your prospectus also mentions that most of your manufacturing is outsourced. About how much growth do you believe you're currently able to handle as capacity currently stands?
Veerina: Our whole manufacturing model is completely turnkey and outsource. We use a partner called MCMS; it's a spin-off from Micron (NYSE: MU) and they have facilities in Idaho and a facility Malaysia. We chose them based on the scalability and the support they can give us. We are 10% or so of their business. So there's no capacity concentrates there and they can scale with our business. And that being said, we are also continuously looking at other partners to meet the demands on our growth.
TMF: Where do you expect to direct most of the proceeds from your offering?
Veerina: It's really general corporate purposes, so we are investing in R&D. We are investing in expanding our channels both domestically and internationally. And internationally we haven't even scratched the surface in many markets like South America. And a lot of these markets follow the U.S. a year or so behind. So there's a lot of growth happening. So that's where we mostly look to invest the proceeds.
TMF: Is there anything else you'd like to add?
Veerina: Well, it's an exciting day and thanks for the opportunity to speak with you today.
Would you work for a bunch of Fools?