Graeme Philipson
May 24, 2016

NetComm surges on new M2M boom

High Growth Focus

NetComm surges on new M2M boom

NetComm boom: The Internet of Things has delivered a 600 per cent increase in shareprice 

ASX-listed NetComm Wireless has a come a long way since it was founded in Sydney in 1982 to manufacture modems. It is now a technology leader in intelligent communications devices, and is riding a wave of success with the global boom in machine-to-machine (M2M) communications.

NetComm is on a roll. Revenues in the 2014-15 financial year were $74.3 million, but in the first six months of this year they surged to $46.4 million, up more than 50 per cent on the same period a year ago. It is on track to break $85 million for the current financial year.

The share market is taking notice. After years in the doldrums the share price surged from 50 cents to over $3 in calendar 2015. It has remained remained strong, giving the company a market capitalisation of around $432 million.

The growth in the share price came as the market started noticing NetComm’s expansion into M2M, driven by the Internet of Things (IoT). Telcos worldwide are moving into the provision of M2M services, and NetComm now specialises in the technology.

It has been a long and hard road. David Stewart has been CEO since 1997, when he engineered a takeover of the company by rival Banksia Technologies, which he founded in 1988.

The company’s two major revenue streams now are in the provision of equipment for the NBN Rural Broadband Fixed Wireless contract, under which it is a prime contractor to Ericsson, and in its fast-growing M2M business, much of which comes from outside Australia.

M2M revenues are now two thirds of the business, and growing. “Our strategy now is to leverage our capabilities to deliver bespoke fixed wireless regional broadband and M2M solutions for leading telecommunications carriers, core network providers, system integrators and enterprise customers worldwide,” says Mr Stewart.

“Our communications technologies are engineered to optimise network performance, enable applications and facilitate smart solutions across diverse vertical industry sectors globally.”

NetComm now has 150 staff, and is aiming for 200 by the end of the year. “Our growth means we are now one of Australia’s largest electronics engineering hirers. Well over half of our staff are engineers and we are continuing to grow our R&D resources.

Mr Stewart says the high growth rate is a challenge, particularly when it comes to finding the right people. “We are constantly on the lookout for more talent, and the challenge is to attract and retain the right staff as a range of new opportunities continue to present themselves.

“We have proven our ability to manage the high growth of our business, and successfully navigated global expansion challenges in the face of difficult local and international market conditions.

“The quickly evolving nature of our industry could be seen as a challenge, but we see it as an opportunity, because of our ability to innovate and adapt. That’s one of our key strengths, and we intend to maintain our adaptability as the company grows.”

Mt Stewart says NetComm has been doing exactly what successive governments have been urging Australian companies to do.

“We often read about Australia becoming a world leading technology based economy. That’s us – we are technology based, with a global focus.

“Government plays a role, but the real key to success is in the execution of a global growth strategy and a great team of employees, not in government subsidies or incentive programs. The single biggest problem we faced from government policies was the tax treatment of employee share options, so we welcome the recent changes.

“There are also some other policy changes that could also make a difference,” says Mr Stewart. “The Austrade’s Export Market Development Grants (EMDG) scheme for export assistance is a good idea, but eligibility is short lived.

“We are a business that has reinvented itself many times over, and entered a number of new markets over the years. It would be good if these grants were aligned more closely with the changing needs of export businesses."

“I believe that market forces trump government assistance over the long term, but things like instant asset write-offs and the cutting of red tape are a big plus for any business. We have grown by look at the market and at the problems people face, and developing tailored solutions in areas such as energy efficiency, smart ticketing and traffic infrastructure. We saw the potential of M2M early and we made the right call.

“Ditto with getting guaranteed broadband performance to rural and regional areas via fixed wireless. We are fortunate that our NBN fixed wireless broadband deployment has proven to be world leading in terms of technical superiority and affordability, and many countries around the world are now looking to Australia for inspiration.”

What does the future hold? “In the next 12 months we have so many opportunities that the challenge is in deciding which of them to pursue,” says Mr Stewart. “Digital demands are driving global change and old generations of network technology are being turned off, or upgraded, to meet the digital needs of the future.

“Some of the opportunities in M2M and fixed wireless are coming from the sunset of 2G networks, global PSTN network shutdowns and a focus on connecting what is commonly referred to as the last mile worldwide.”

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