business
Continued: A bubble of broadband spending
- Article by: STEVE ALEXANDER , Star Tribune
- Last update: May 9, 2009 - 4:25 PM
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For some companies, the Obama administration's stimulus spending couldn't have come at a better time.
About $7.2 billion of the federal stimulus package was earmarked for high-speed Internet access networks in areas that aren't served or are underserved. That could make a big difference for Clearfield Inc., a 107-employee company in Plymouth that makes fiber-optic connectors for high-speed voice, video and data networks typically used in rural communities of about 8,000 homes.
"We're in an economic 'de-stimulus' period right now, because potential customers are waiting to see what will happen with the stimulus funds," said Cheri Beranek Podzimek, Clearfield's president and CEO. "But the stimulus package could be very good to us."
Some experts agree.
"There are more communities chasing after broadband stimulus money than there is money available," said Craig Settles, an Oakland, Calif., community broadband consultant. "So companies like Clearfield are in a position to do well. There could be a two-year bubble of broadband spending, from late 2009 to early 2011."
There are several potential customers for Clearfield in small communities, Podzimek said. The phone companies want to upgrade their old copper-based networks to higher-capacity fiber optics so they can compete with cable TV in delivery of voice, video and Internet services. Cable TV companies with older networks may need to upgrade them to carry more services. City and county governments want to build broadband networks as a way to attract and keep jobs that require fast Internet connections.
While those customers wait to find out if they can qualify for federal stimulus money, Clearfield, which announces earnings Monday, must wait for a pickup in business later this year, Podzimek said.
Equipment has been preapproved
But Clearfield's existing business connections may help it get some of the broadband stimulus funds. Many of its customers previously have obtained Internet project loans through the U.S. Department of Agriculture's (USDA's) rural development unit -- the same organization that will distribute part of the federal broadband stimulus money. As a result, Clearfield's equipment already has been preapproved for use in projects funded by the Agriculture Department, Podzimek said. In addition, the other federal agency distributing the broadband stimulus funds, the Commerce Department, is expected to use the USDA's list of approved equipment, she said.
While Clearfield hasn't attracted any analyst coverage, its thinly traded stock has recovered after the market collapse, rising from 75 cents a share in late November to close at $1.40 on Friday.
"We're in a difficult situation in terms of our size when it comes to getting a lot of attention from analysts," Podzimek said of the firm, which earned $1.5 million last fiscal year on revenue of $23.5 million. "We're focused on building the foundation of the company and haven't spent any money on investor relations."
The company makes connecting panels called "office frames" that link the source of a voice, video or data signal to the fiber cable that carries the signal to the right home or business customer. It also makes outdoor devices called cabinets and pedestals that subdivide the cable into the individual fibers that connect to a particular building. Last week it began selling network amplifiers, which are used in all fiber optic networks to keep the signal strong.
"The lay person might say what we do is kind of a yawner, but our products hugely affect the user experience and the network's performance," Podzimek said.
Clearfield was founded and went public in the 1980s as APA Optics, later APA Enterprises, which made precision optical lenses and ultraviolet light detectors. But that business was unprofitable, and the company's business shifted when it acquired two fiber optic cable firms. In January, 2008 the company became Clearfield and now competes with much larger companies, such as ADC Telecommunications of Eden Prairie and New York-based Corning Inc. Sometimes it wins contracts by offering a lower price.
"We looked at ADC and were really impressed, but they priced themselves out of our range," said Mark Colvin, the outside plant manager at phone company Liberty Communications in West Liberty, Iowa. Buying from Clearfield saved about $30,000 on a $4 million network expansion project. Colvin also liked the Clearfield design, which made connecting the fiber optic cables easy. "Our project isn't done, but so far their equipment has worked well," he said.
Steve Alexander • 612-673-4553
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