TrueNorth sees growth even in a down economy

 - January 29, 2009, 8:02 AM

It’s been less than two years since startup airborne telecommunications firm TrueNorth Avionics of Canada introduced its first products–the Simphone (pronounced symphony) line of cabin communications systems. Today, with the economy in serious trouble and business jet sales activity slowing down, the company’s growth prospects would seem severely dampened. Yet senior officials say tough economic times could actually present opportunities as TrueNorth positions its products as the “high-end, low-cost” alternative to satcom systems from better-known competitors.

“It seems every day we’re hearing about layoffs, and obviously the economy is slowing, but our company has been growing in the last year and I’m actually pretty excited about this year as well,” said TrueNorth Avionics CEO and founder Mark van Berkel. “I’m juxtaposing myself against a lot of others in the industry, but we’ve worked hard in the last couple of years and I think we’re going to see the fruits of our labor being realized in 2009.” 

Even with the economy’s troubles, TrueNorth currently is involved in a handful of important projects that will provide sorely needed revenue in the coming months.
Most recently the company landed a deal to supply communications equipment on an Airbus A340 for a head-of-state customer. That single contract win includes satcom gear and more than 40 telephone handsets throughout the cabin, all linked through a central control system. TrueNorth is supplying around 75 percent of the equipment, van Berkel said, adding that the deal marks the company’s single biggest contract win to date. Other similar deals are in the negotiation stage, he added.
“We’re continuing to grow,” he said. “As some companies are laying people off, I’m just getting ready to take advantage of that and hire some of those good people.”

TrueNorth has close to 30 employees, most of them based at its headquarters in Ottawa. The company is located only a short drive from competitor EMS Satcom, where van Berkel worked before founding TrueNorth Avionics in 2004. EMS is the leading supplier of satcom equipment in business aviation (it also builds satcom hardware for Honeywell and Rockwell Collins) and clearly has little cause for concern at this early stage about the potential competitive threat posed by its new neighbor.

Still, the story is somewhat reminiscent of the situation that unfolded after the creation of Garmin. That well known brand, formed by two former Bendix/King engineers, has become a leading force in avionics not to mention consumer electronics–as well as a major thorn in the side of Bendix/ King, now a part of Honeywell. It’s a comparison that many at TrueNorth embrace. “We are a little like Garmin,” said TrueNorth v-p of sales Clark Gordon. “Mark had some good ideas about what kinds of products he thought the market needed and decided to take the chance and start his own company.” The payoff will come only if TrueNorth can duplicate even a tiny fraction of Garmin’s success–the Olathe, Kan. company currently has more than 8,000 employees and is expected to post revenues of around $3 billion for the last fiscal year.

While TrueNorth may never grow into a multibillion-dollar company, the focus for the rest of this year will be on growth, starting with the hiring of more salespeople.
“That’s where I think you should look to grow in a down economy,” van Berkel said. “You put your focus back on sales and marketing, and get smarter about it. I think we have an exceptionally valued product, and so when customers are being more discriminatory about how they spend their dollars, I think they’ll look at what Simphone offers and realize, Wow, I get a lot of value for my money.”

Simphone, obviously, is a play on words. On the one hand it is meant to offer the connotation of a “simple phone,” but it is also a system intended to integrate “harmoniously” with all other system components, “just like a symphony orchestra,” van Berkel said. Based on an Ethernet architecture that includes the handsets, voice capability, Wi-Fi connection and broadband data pipe, all of the individual components are integrated into a single system, with three versions offered (Chorus, Duo and Prelude). “Where our competitors sometimes have four or five boxes, we have one box that accomplishes all of that, and that’s really what makes it easier to install and use,” he said.

The secret to TrueNorth’s early success lies in its VoIP (voice over Internet protocol) telephone handset. When TrueNorth was formed, a key consideration focused on bringing all of the features and functions to a cabin handset that corporate executives would expect to find in a multimillion-dollar business jet. That meant incorporating noise-canceling microphones, sunlight-readable LCDs, backlit keypads, a high-quality ear speaker and digital VoIP technology across the product line. That early hunch about what customers wanted in a handset appears to have paid off. 

Poised for Growth
TrueNorth saw its revenue grow by about 65 percent last year, thanks to strong inroads it has made into the business jet, executive helicopter and military VIP markets. Sales in the business jet retrofit market are expected to suffer this year, but head-of-state and military VIP work should take up the slack, said Gordon. The good news is that TrueNorth expects this year to come close to the success of a record 2008. “We’re anticipating we will see growth again in 2009,” Gordon said, putting the projected figure in the 40- to 50-percent range.

That’s not to say the economic climate can be navigated without facing risk or setbacks. To the contrary, a large percentage of TrueNorth’s business comes from retrofits of large-cabin business jets. This segment has experienced a considerable slowdown in activity in the last six months. That trend is likely to continue for some time. Sellers, likewise, are having a hard time offloading airplanes, and that has been having an effect on the market for cabin upgrades as well. “We are going to see an impact,” van Berkel conceded, “but I think we have played our cards well for the last couple of years and are poised to gain from some other contracts we have been working on.”

Since the company’s formation in 2004, and with the later launch of its first products in 2007, TrueNorth has made impressive inroads into the business aviation market, which accounts for the bulk of its revenue. Its first STC covered the installation in a Bombardier Global Express of a Simphone communications system, and since then TrueNorth has focused on the executive VIP market with good success. Last year the firm delivered more than 250 products compared with the 60 it shipped in 2007.

The company last fall introduced a two-channel Iridium communications system for the cabin called Simphone Prelude ($24,900 list price) intended for installation in light jets and turboprops. It is based on equipment TrueNorth supplies in large-cabin jets and features the company’s ClearCall technology, the menu-driven handsets and an all-digital architecture. The system can also be upgraded to provide operators with Inmarsat satcom voice service, broadband data, Wi-Fi capability and use of a personal BlackBerry for sending e-mail. (Simphone Chorus [$55,000 list] is TrueNorth’s top-of-the-line system, while the lower-priced Duo product also includes two channels of Iridium for worldwide voice calling as well as several office phone interfaces.)

TrueNorth Avionics also recently introduced Simphone Global Broadband, a compact satellite-based high-speed data system for worldwide business aviation use. Created through a partnership with satcom maker Cobham, Simphone Global Broadband components are claimed to weigh less than 20 pounds and include a 2-MCU satellite data unit, a high-power amplifier/diplexer unit and an antenna. The system is compatible with the Simphone Chorus phone system and offers initial service via Inmarsat Swift64, with SwiftBroadband compatibility on the roadmap.

TrueNorth also announced recently that Sikorsky Aircraft has selected the Simphone systems as standard options on new S-76s and S-92s, starting with two installations that were completed last summer at Sikorsky’s Keystone Helicopter subsidiary. Other OEM deals are in the works, as is additional product development, with announcements possible later in the year.