Clearfield CEO Cheri Beranek holds the company’s signature device, the Clearview Cassette, which helps customers manage fiber-optic connections.

Glen Stubbe, Star Tribune

Fiber-optics maker clears hurdle

  • Article by: STEVE ALEXANDER
  • Star Tribune
  • November 13, 2011 - 9:12 PM

Clearfield Inc. of Plymouth now has a million-dollar bell.

"When we started the company in 2007, our salespeople would ring the bell for an order of $10,000 or more," said CEO Cheri Beranek, 48. "Then we got a different bell for $100,000 orders.''

The fiber-optics connectivity firm's million-dollar bell rang in sales in the just-completed fiscal year of $35.2 million, up 44 percent, while earnings were $6.2 million, up 422 percent.

That's not bad for a 165-employee Plymouth company that in four years has emerged from 20 years of financial losses as part of APA Optics, a company whose fiber-optic products were never successfully commercialized. And it has watched its shares rise from 75 cents three years ago to $6 last week.

The APA Optics business was discontinued in 2007, and Beranek, the president of a company APA had acquired, became the CEO of the surviving operations. The company was renamed Clearfield in 2008.

"We were a cash-cow operation that APA Optics was milking but had forgotten to feed," said Beranek, who grew up on her parents' farm in New Ulm, Minn.

Even though Clearfield is not a household name, its fiber-to-the-home products connect a lot of households.

In Bemidji, Minn., rural telephone and Internet customers are connected through Clearfield products that make sure calls and Web pages get to their destinations over fiber-optic cables. Around the nation, half of all independent telephone companies are Clearfield customers. In some of the new fiber-to-the-home projects funded through the federal broadband stimulus program, the last 100 feet of connections to the Internet will come from Clearfield.

The company is based on multiple configurations of a single product: the Clearview Cassette that organizes a cacophony of hundreds of fiber-optic signals into individual connecting points that a human technician can manage. Each $250 cassette contains a dozen pre-wired connection points; customers buy only as many cassettes as they need. Clearfield also sells indoor racks, outdoor boxes and wall units that hold the cassettes. A single cabinet holding 24 cassettes is the end connection point for 288 of the tiny fibers, each one carrying its own stream of voice, video or data.

"We're the only company in the industry that has a single architecture for deploying fiber-optic cable," Beranek said. "We can scale up using the exact same product at each part of the network. And we save the customer money by reducing the inventory of parts they need."

Clearfield competes with fiber-optic giants Corning Inc. and Tyco Electronics (which last year acquired former Clearfield competitor ADC Telecommunications of Eden Prairie), and does so by occupying a market niche: It sells to about half of the 800 small, independent rural telephone companies, such as Paul Bunyan Rural Telephone Cooperative in Bemidji. More than 80 independent telephone companies are based in Minnesota.

"What set us on the road to success was sitting across the table from engineers at small telephone companies and designing products for their needs," Beranek said.

Paul Freude, CEO of Paul Bunyan Telephone, said that while Clearfield is a small company "it always provided us with good quality products at comparable prices. A lot of our territory is very rural, and the Clearfield modules allow us to scale up later. And our engineering department developed a relationship with the leaders of Clearfield early on."

While Clearfield isn't a large enough public company to attract analyst coverage, those who cover the optical fiber industry says the outlook is favorable. Many of the broadband-stimulus projects are starting construction after being delayed by federal red tape and a worldwide shortage of fiber-optic cable that resulted when this year's Japanese earthquake disrupted manufacturing.

"Much of Clearfield's growth the last several quarters is from non-stimulus customers who are undertaking projects without stimulus dollars," wrote investor C.R. Tarbert on the website in July. "As stimulus projects start to accelerate through the rest of 2011 and 2012, it will likely mean incremental revenue, possibly substantial incremental revenue, for Clearfield."

Beranek said the stimulus has produced "about $1.3 billion of available funding for the kind of work we do."

The fiber industry also is getting a boost from the arrival of 4G cellular networks, which carry vastly more data. Because cell towers must handle more data, they need fiber-optic wired connections to central switching offices instead of the traditional copper phone lines.

"There are almost 300,000 cellular towers in this country, and less than 5 percent are connected by fiber-optic cable today," Beranek said.

Blair King, vice president and senior research analyst at investment banking firm Avondale Partners in Nashville, is bullish on fiber.

"I think 2012 should be a good year for the fiber industry," King said. "And Clearfield is an interesting little company. They're like a little ADC."

Beranek sees the company as small and close-knit.

"People talk about a company being like a family, but it's not like that," she said. "It's like a farming community where everybody minds their own business, but if anyone's got a problem, everybody surrounds them with resources to help.''

Beranek has been named a finalist in the Eighth Annual Stevie Awards for Women in Business, an international competition. "It's nice to be recognized, but it's really a recognition of companywide performance," Beranek said. "It's important that shareholders and customers have a comfort factor that this is a well-run company."

Steve Alexander • 612-673-4553

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