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Magor Corporation (V.MCC) on selling to government and disrupting a $32 billion market

Stockhouse Editorial
0 Comments| November 12, 2013


pascoe.jpgMike Pascoe is well known for his strong record of building shareholder value in the telecommunications industry and for his active role on the boards of leading up-and-coming technology companies, such as ANDA Networks.
 
His track record on developing tech firms that get snapped up for big bucks is impressive: Most recently, Mr. Pascoe was CEO of Meriton Networks and led its private sale to Xtera Communications, and before that was CEO and President of PairGain Technologies, which ADC acquired in 2000 for $3 billion. The electrical engineer out of University of Waterloo worked at PairGain before that, where he was a key member of the executive management team at Newbridge Networks (acquired by Alcatel in 2000 for $7 billion) as the president of the U.S. division, as well as the EVP/GM of the North and South American business regions.
 
Today, Pascoe is President and CEO of Magor Corporation, and joins us to discuss a company on the rise that is turning video conferencing technology on its ear.
 
Mike, tell me what’s so unique about Magor.
Magor (TSX: V.MCC, Stock Forum) provides enterprises with new ways to interact with video so we can collaborate more effectively at any distance. We observed that leading video conferencing technology uses an aging architecture originally designed around a scheduled meeting model with a single presenter. And we also recognized that as the pace of business continues to increase, the video conferencing model of working together will struggle to keep up. So, in 2007 we stepped back and decided that we needed to build a solution for video interactions that enables flexibility and choice for any way of working – not just for scheduled meetings and presentations.
 
Magor’s Aerus software platform provides the innovation and flexibility to easily bring together the people we need, when we need, and with the information that is relevant. Sure you can still do video conferencing, but it’s not your only option anymore when you interact with video. As demand for video-enabled solutions in the enterprise continues to increase, our ability to deliver Aerus as a service to devices, ranging from mobile all the way to integrated control rooms, will be completely unique.
 
Magor’s patented software also solves two costly issues associated with existing video conferencing approaches. Firstly, Aerus can use regular internet connections, rather than expensive dedicated bandwidth. And secondly, traditional video conferencing approaches require dedicated hardware infrastructure called a multi-point control unit (MCU), which you could think of as a “bridge” for group calling. Along with being the root cause of inflexibility I indicated earlier, hardware bridges are very expensive to put in place and maintain, with starting costs between $5,000 to $8,000 per port. We’ve been able to take the bridge out of the equation.
 
Finally, unlike some other new vendors, our software platform not only offers forward-looking capabilities but also enables backward compatibility with traditional video conferencing solutions. We are particularly excited about our recent development in supporting video communication with web browsers running WebRTC. This has significant implications for both Business to Business (B to B) and Business to Consumer (B to C) applications.
Magor’s software, which we have spent over $20 million dollars developing, empowers people to naturally work together using video, at a fraction of the cost of what is currently available out there. So as you can imagine, we’re completely disrupting the video conferencing and collaboration market and we are very excited about this.
 
You recently announced a follow-on order with a Middle Eastern government agency, was this the first government contract your team has sought out?
No, we have done work with both this agency and others.

How did it come about and have you or your team had any previous experience in government tendering?
Yes, a number of our team have worked closely with government business in the past, including our own Canadian government. As often is the case, it is a matter of who you know at the right time. In this case, it was another one of our Chairman Terry Matthews' companies that introduced us. From there, we were asked to bid. As you can surmise from the discussions on our capabilities above, we are very competitive in such tenders, which helped us secure the initial business. From there, it is all about performing, as the customer is now on your side.
 
Are you focused specifically on government contracts?
No, but it is an important sector.
 
Do you find navigating a government tender to be a more difficult process than B2B contracts? 
Not surprisingly, it depends. This Middle Eastern contract probably took six months from initial contact to close. That is not unusual in the B2B world as well. In both cases there are shorter and longer cases. As for the difficulty, there are often some additional hurdles we need to overcome to get on the 'approved supplier' lists for government departments. When that is achieved, you are still competing with other 'approved suppliers' but that is where our unique 'attributes' described above help.
 
What are the potential pitfalls?
If you are supplying custom hardware, there are often electrical safety and other regulations you need to pass. This can be quite onerous. In our case however, we supply software, which does not have such requirements. Our software of course runs on computers, but these along with monitors and cameras are commonly available in all countries.
There have been no surprises as I have been doing this for many years. A key is a strong local partner with good connections and experiences in this business.
I should also point to the strong support provided by Canada's Foreign Affairs teams worldwide. I have worked with them for many years and have always been impressed with the positive pro-active support they provide Canadian companies.
You also have to pay attention to local customs and sensitivities. This comes from working with the right partners and your own experience.
 
For your overseas contracts, do you seek out partners on the ground to help you navigate the process or do you have the expertise you need in-house?
We definitely work with local partners who bring strong sales contacts and abilities, as well as local technical support. I am responding to these questions from our office in Dubai. That should tell you how serious we are in this region.

Tell me about your other clients and how they are using Magor’s solutions
Our clients vary considerably from government departments to banking to oil, gas and mining to technology firms to other verticals such as police/security, health care etc. A common use of course is connecting the many global sites these companies have in a manner that mimics the face-to-face meetings and collaborations. This accelerates better decision and more immediate decision making. A growing need for demand-based collaboration is also driving our business. Imagine a problem at a mining site that can be relayed from a local mobile camera instantly to a team of experts for discussion and recommendations. During this interaction, a call is made to a supplier who shares necessary documents (drawings for example) to help in diagnosing the problem. Imagine this same demand driven collaboration in the police and security market.
As you can imagine, I could go on. That is the exciting part of our business - how it is used to make better decisions faster, solve problems and as a part of the strong video interactions, build a more effective team.
 
Why do you think an investor should be interested in Magor?
Investors should be interested for a couple of reasons. First of all, our technology is truly disrupting the market for the reasons I mentioned earlier, in a growing market that is estimated to be about $32.3 billion. We are currently working with over 20 different service and solutions providers across the Globe, that are planning on bringing our Aerus cloud-based visual collaboration solutions to their enterprise and government clients. That list is growing every month. Through these service providers who have access to millions of customers, we see a clear path to grow exponentially going forward. With the launch of Aerus, we are also transitioning into a recurring revenue model that will bring a great degree of stability into our cash flow. As you know, many markets are shifting away from the heavy upfront cost burden of CAPEX model to an OPEX model that basically creates a shared risk and shared rewards environment between vendor, channel and user. So we expect to see each client that comes in through our partners, signing two to three year contracts for our services. This is a model that is very similar to your mobile plans. We love this model, because the cash flow can only grow as we bring new clients in and is a benefit to the customer. This is a huge opportunity for an accelerated growth of our company, and maximizing shareholder value.
 
Disclosure:  Magor Corporation is a Stockhouse client.
 

Tags: SOFTWARE - APPLICATION

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