CalAmp Corp.

REORGANIZATION IN 1998

BEGINNING AN ACQUISITION CAMPAIGN: 2003

ORIGINS

CalAmp was incorporated in 1981 as California Amplifier, Inc., the name it would operate under for nearly 25 years. The name change signified the adoption of a new business strategy for the Oxnard, California-based company, one of several major shifts in market focus the company would make during its history. Starting out under the California Amplifier banner, the company developed and manufactured microwave components and systems for commercial and consumer applications, but it primarily supplied the U.S. Department of Defense with its products. Prime market conditions greeted California Amplifier during its first decade of business, as military spending swelled during the two-term Reagan presidency, stoked by the decades-long rivalry between the United States and the Soviet Union. California Amplifier gained its financial footing as a defense contractor, but it was forced to abandon its primary source of revenue when the Cold War ended at the decade’s conclusion. In 1989, the company severed its ties with the Department of Defense and focused all its research and development and marketing efforts on commercial and consumer applications. The transition—not the last the company would initiate because of changing market conditions—pointed California Amplifier in two directions: serving the wireless cable and satellite television markets.

At the beginning of the 1990s, California Amplifier organized itself along its two product lines, establishing a wireless cable television segment and a satellite television segment. For both segments, the company developed products that converted and processed signals that delivered programming to consumers’ homes. Wireless cable used technologies similar to coaxial cable, multichannel television transmission, but eliminated the need for a cable connecting the headend/transmission site to each home. Instead, a wireless system comprised a headend/transmission site, a transmission tower, and at each subscriber’s home, a reception antenna, a down-converter, and a decoder or set-top converter. In the satellite television segment, the company’s product sales were generated primarily from downconverters, amplifiers, and integrated feedhorns and amplifiers used in home satellite dish applications.

California Amplifier enjoyed steady, encouraging financial growth from both its operating segments during the 1990s, aided by technological advancements and the passage of federal legislation. On the wireless cable side the company’s customers, wireless cable operators, gained strength early in the decade thanks to rulings made by the Federal Communications Commission (FCC), the U.S. agency charged with regulating interstate and international communications by radio, television, wire, satellite, and cable. Between 1990 and 1991, the FCC made a series of rulings that enabled wireless cable operators to consolidate channel frequency licenses, which allowed operators to increase channel capacity on their systems. Of singular importance was the Cable Television Consumer Protection and Competition Act of 1992, regarded by industry experts as the most influential piece of legislation affecting wireless cable operators. The legislation forced programmers to make their service available to all operators at a fair and reasonable price, further stipulating that cable operators could not price their services differently in various areas, thereby preventing higher prices in regional areas where wireless cable operators focused their marketing efforts.

Like its wireless cable business, California Amplifier’s satellite business benefited from the growth of service operators. The evolution of home satellite systems in the United States between the 1980s and 1990s turned “backyard” dishes into “pizza-box” dishes, securing a lasting place for satellite television in the consumer marketplace. During the early 1980s, home satellite systems utilizing C-Band dishes were capable of receiving a wide variety of television broadcast signals, including programming delivered by pay television operators, but in 1986 premium broadcasters began to scramble their transmission signals. Satellite installations, already limited by the five- to 12-foot diameter of the dishes, declined in the wake of the scrambling efforts. The industry, and California Amplifier’s satellite business, received a revitalizing boost with the introduction of the Direct Broadcast System (DBS) in 1994. Using high-powered satellites and the digital Ku-Band, the DBS received a significant number of channels because the DBS satellite transmitted digital signals at high power levels, requiring dishes only 18 inches in diameter. Consumers, overwhelmingly, chose pizza-box-sized dishes over apparatus that filled most backyards.

COMPANY PERSPECTIVES

CalAmp leverages more than 20 years of technology and industry experience to provide an integrated approach to help our clients realize their vision, and select the right technology to dramatically transform and accelerate their business. Whether a customer requires one single solution or entire lifecycle product development, CalAmp’s comprehensive approach is a benefit that few other organizations can offer. We understand how the wireless and communications worlds work together so we can assure the highest quality, fastest and most valuable solutions on the market. Our team of engineers and business and technology consultants work closely with customers to plan, solve and anticipate every aspect of technology deployment. We develop and produce dynamic applications and products from hardware devices to software applications to mobility solutions, creating communications that enable our customers to gain a competitive advantage.

California Amplifier made the transition from operating as a military supplier to operating as a commercial supplier without much trouble. The technology developed by the company was easily adapted to private sector applications, making for a seamless change in its market orientation. In 1992, sales eclipsed $20 million, jumped to $40 million two years later, and reached $61.5 million in 1996. The steady, substantial increases were recorded while the company experienced major changes in the relative importance of its two business segments. In 1994, California Amplifier relied on satellite television for two-thirds of its business, but within two years the company’s wireless cable business became its primary revenue-generating engine, accounting for 70 percent of sales in 1996. California Amplifier’s wireless cable sales shot upward thanks to strong international demand for its reception products and to the introduction of its broadband scrambling system, MultiCipher, while its satellite sales dipped as it made the switch from making C-Band dishes to the Ku-DBS alternative.

REORGANIZATION IN 1998

After a strong first half of the decade, California Amplifier demonstrated less financial vitality during the second half of the 1990s. The sales total recorded in 1996 became the decade’s high, as the company suffered downturns affecting both its business segments. Sales dipped to $46.9 million in 1998 and to $37.1 million in 1999. More distressing, the company’s record of consistent profits came to an end, halted by a $2.6 million net loss in 1998 and a $1.4 million net loss in 1999. In response, California Amplifier reorganized its structure, establishing three business units—satellite products, wireless cable products, and voice and data products—in January 1998. Further alterations were made in September 1999, when the company combined its wireless cable and voice and data units into a single entity, wireless access products.

The start of a new decade brought a welcomed change in the company’s financial performance. After registering three consecutive years of declining revenue, California Amplifier generated $86.4 million in revenue in 2000, a 130 percent increase from the previous year that was drawn from an enormous increase in satellite-related sales. The company had purchased Gardiner Communications in April 1999, a $9 million transaction that greatly bolstered California Amplifier’s DBS product line. Satellite sales leaped 377 percent between 1999 and 2000, reaching $60 million, as the company fed the demand for dishes by operators such as DirecTV Inc. and EchoStar Communications Corp., owner of the DISH Network.

Acquisitions would figure more prominently in California Amplifier’s expansion plans as the company moved forward. Its 20th anniversary in 2001 saw another major increase in revenue driven by a 40 percent increase in satellite sales and a 60 percent increase in wireless access sales. The company generated $125 million in revenue in 2001 and, for the first time in three years, it turned a profit, posting $5.2 million in net income. The financial gains were encouraging, but the company’s management began to worry about the lack of balance between its two primary business segments. Satellite products accounted for 68 percent of California Amplifier’s revenue in 2001, far more than the 25 percent generated by wireless access products. In the years ahead, Fred Sturm, who served as chief executive officer and president, and Ira Coron, who served as chairman, turned their attention to balancing California Amplifier’s business, an objective they would achieve by completing a series of acquisitions.

KEY DATES

1981:: California Amplifier, Inc., is founded.
1983:: The company completes its initial public offering of stock.
1989:: California Amplifier ends its involvement in defense-related business and focuses on the commercial and consumer markets.
1994:: The Direct Broadcast System is introduced in the United States.
1999:: Gardiner Communications is acquired, strengthening California Amplifier’s satellite products business.
2004:: Vytek Corp. is acquired, prompting the company to restructure itself and change its name to CalAmp Corp.
2006:: Dataradio, Inc., is acquired.
2007:: CalAmp purchases SmartLink Radio Networks Inc. and AirIQ Inc.’s vehicle finance division.

BEGINNING AN ACQUISITION CAMPAIGN: 2003

Management’s concerns about an over-reliance on satellite sales piqued in 2002 as the company felt the repercussions of its lopsided stance. Satellite sales began to falter during the year because one of its largest customers, the notoriously beleaguered WorldCom, canceled its orders. California Amplifier reduced its staff and sold a manufacturing plant during the year in response to the setback, which led to a decline in revenue to $100 million. A more positive response followed in December 2003, when the company announced it had agreed to acquire Vytek Corp. in a $77 million, all-stock deal. Based in San Diego, where it had relocated from White Plains, New York, in 2002, Vytek was a $38.4 million-in-sales company that derived 40 percent of its business from wireless products and 60 percent from software development and consulting. “As a result of this acquisition,” Sturm remarked in a December 25, 2003, interview with the Daily Deal, “our customer base will grow and diversify beyond satellite television and telecommunications providers to include large- and medium-sized enterprise customers, thereby expanding our market reach and distribution channels.” The acquisition was completed in April 2004, prompting California Amplifier to change its name to CalAmp Corp. and to reorganize its operations into a divisional structure. The satellite and wireless access units were combined with Vytek’s products manufacturing business to form the products division. Vytek’s service-oriented business, its principal area of focus, became CalAmp’s solutions division.

In the wake of the third major restructuring effort in its history, the company launched an acquisition campaign aimed at entering new markets with higher growth and profit margin potential. In April 2005, CalAmp acquired Carlsbad, California-based Skybility, a developer and supplier of embedded cellular transceivers. The devices were used in telemetry and asset tracking applications. In May 2006, the company struck again, signing an agreement to acquire Dataradio, Inc., for $54 million. Based in Montreal, Canada, Dataradio set up networks that enabled emergency responders to use laptop computers to share information with dispatchers over private data networks. CalAmp followed up its acquisition of Dataradio by purchasing SmartLink Radio Networks Inc. for $8.1 million in March 2007, one of two acquisitions announced during the month. Smart-Link, based in Connecticut, made a product that enabled public safety agencies operating on different radio systems to speak with each other in real time, possessing technology that complemented Dataradio’s expertise. The other acquisition in March 2007 was the purchase of the vehicle finance division of AirIQ Inc., a $19 million deal.

CalAmp was preparing for the future by diversifying its market presence. The company’s spending spree touched off by the acquisition of Vytek totaled nearly $90 million by mid-2007, pushing it into new markets, the data communications market in particular. Further acquisitions were anticipated in the years ahead as the company sought to diversify beyond its core competency in satellite product sales. CalAmp claimed to control roughly 50 percent of the DBS market in the United States, maintaining a commanding lead that, despite its efforts to diversify, it did not intend to relinquish. The company was in the final stages of developing products capable of receiving transmission signals from up to five different satellites, a necessity to meet the rigors of high definition television service. Accordingly, as CalAmp pressed ahead with its plans, the company looked to its nearly three-decade-long involvement in the satellite sector and to emerging markets for its future success.

Jeffrey L. Covell

CalAmp Corp.

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CalAmp Corp.

ORIGINS

REORGANIZATION IN 1998

BEGINNING AN ACQUISITION CAMPAIGN: 2003

PRINCIPAL SUBSIDIARIES

PRINCIPAL DIVISIONS

PRINCIPAL COMPETITORS

ORIGINS

COMPANY PERSPECTIVES

REORGANIZATION IN 1998

KEY DATES

1981:: California Amplifier, Inc., is founded.
1983:: The company completes its initial public offering of stock.
1989:: California Amplifier ends its involvement in defense-related business and focuses on the commercial and consumer markets.
1994:: The Direct Broadcast System is introduced in the United States.
1999:: Gardiner Communications is acquired, strengthening California Amplifier’s satellite products business.
2004:: Vytek Corp. is acquired, prompting the company to restructure itself and change its name to CalAmp Corp.
2006:: Dataradio, Inc., is acquired.
2007:: CalAmp purchases SmartLink Radio Networks Inc. and AirIQ Inc.’s vehicle finance division.