Broadband access company founded by former Cisco systems architect.
Occam Networks, a Santa Barbara, Calif., provider of broadband access equipment, is the fastest-growing technology company in North America, according to a ranking released today by Deloitte & Touche.
Occam sells Ethernet and IP-based equipment that lets carriers provide high-speed Internet connections and related voice, data and video applications to customers.
Occam was founded by Mark Rumer, a former systems architect for Cisco and a pioneer in VoIP technology. Occam’s customers include small telephone companies and such cooperatives as the Ben Lomand Telephone Co-Op and the Farmers Mutual Cooperative Telephone Co.
Occam tops the 2006 Deloitte Technology Fast 500 because it grew 48,948% in the last five years, with revenue increasing from $80,000 in 2001 to $39.2 million in 2005. This is the first time Occam has appeared on the ranking.
“They are a company that helps small and medium-sized telephone companies develop high-speed capabilities. The need for speed is on, so it’s not surprising that these guys are growing so fast,” says Tony Kern, U.S. deputy managing principal of Deloitte’s Technology, Media and Telecommunications industry practice. “These phone companies have the identical needs of the Verizons and AT&Ts of the world,” he says.
Communications and networking companies, such as Occam, represent 65 — or 13% — of the 500 companies on Deloitte & Touche’s list.
The communications industry segment came in third behind the software segment, with 178 companies, and biotech/pharmaceuticals, with 77 companies. However, communications companies were the fastest-growing segment on the list, with an average growth rate of 3,778% compared to 2,242% last year.
“This is a great place for the communications/networking segment to be,” Kern says, pointing out that it has risen from fifth place last year. “To see it move up this year is pretty impressive. It’s ranged between 13% and 20% of the list over the last few years.”
In addition to Occam, three other communications and network companies –two of which are headquartered in Canada — made it to the top 10 of the Fast 500 ranking:
Litle & Co., a payment processing solutions vendor from Lowell, Mass., was ranked third, with revenue growth of 33,683%: $103,000 in 2001 to $34.8 million in 2005.
Airborne Entertainment, a Montreal start-up that produces mobile content for popular brands, was ranked fourth, with revenue growth of 33,328%: $107,000 in 2001 to $35.8 million in 2005.
DragonWave, based in Kanata, Ontario, sells broadband wireless equipment to network operators. It ranked seventh, with revenue growth of 18,969%: $102,000 in 2001 to $19.5 million in 2005.
Kern says it’s a big deal that communications/network companies represent four of the top 10 companies on the list.
“Even though there is a great deal of consolidation among the big telephone companies, the need for high-speed networking gear and greater bandwidth makes this sector still strong,” Kern says. “Most of the service providers are looking for innovative solutions that are scalable, that are going to last and that are interoperable.’’
Big growth for bigger companies
Although the Fast 500 list consists mostly of small start-ups, three large communications and network companies made the list:
Research In Motion (RIM), the Waterloo, Ontario makers of the BlackBerry wireless device, is ranked 342 on the list. RIM’s revenue grew 377%: $342.7 million in 2001 to $1.6 billion in 2005. This is RIM’s seventh appearance on the list.
UTStarcom‘s revenue grew 367%, from $626.8 million to $2.9 billion, in the last five years. The Alameda, Calif.-based company, which sells converged broadband wireless and wireline products to carriers, is ranked 350.
L-3 Communications Holdings, which is ranked 400, grew 302% from $2.3 billion to $9.4 billion in the last five years. This New York City company provides secure communications systems to the U.S. military and intelligence communities.
“You can be big and still grow fast. It all depends on how you run the company and what happens in the marketplace,” Kern says, adding that all three of these companies are benefiting from the fact that “IP is hot.”
In other trends, the growth rates of the companies that comprise the Fast 500 list are down this year from previous years. In 2002, the average growth rate for the top five companies was 196,762%. In 2006, the average growth rate for the top five companies is 38,107%.
Kern says the decline is due to higher interest rates, which prevent companies from borrowing as much capital to fund growth, and an overall tech industry slowdown over the last five years.
“Our data is a look backwards, so we still see a little bit of a hangover” from the dot-com bust, Kern says. “My personal opinion is that we will see overall growth rates turn around and start going back up soon. We’re going to see convergence drive these growth rates over the next few years.
