Aviation guru is set to soar at software firm

Terry Stinson knows pressure, having led Bell Helicopter Textron Inc. when its troubled V-22 tilt-rotor aircraft program was under intense stress. So it is little surprise he appears to have eased Xelus Inc. out of a recent nosedive.
Stinson, 60, brings an impressive resume to Rochester. Before running Bell Helicopter, Stinson oversaw several Textron divisions, including Cessna, which has built more aircraft than any other company.
He took the Xelus job because he encountered failure for the first time in his career-with retirement. A few weeks into it, he was climbing the walls of his Fort Worth, Texas, home and knew he had to get back into the game.
Xelus built a solid reputation in the aviation industry, selling software that helps airlines track spare parts and mechanics’ schedules. The Perinton-based software company has roughly 135 employees, and its revenues dipped below $30 million in 2002.
Company insiders say, however, the Xelus board was upset with its direction under former CEO Michael Fabiaschi.
Fabiaschi left Xelus last fall and shortly thereafter became president and CEO of Aprisma Management Technologies Inc., a New Hampshire-based maker of network-monitoring software. His new job has not been any easier-in March, Aprisma reached a settlement with the Securities and Exchange Commission for misstating revenue in 2001 and 2000, before his arrival.
Since Stinson took the controls, Xelus has acquired Kirus Solutions Inc., a California company that tracks parts’ warranty information. And last week, it announced its two largest new deals since 2001: a contract with Stockholm-based Electrolux AB, maker of Frigidaire refrigerators and Eureka vacuums, and a deal with Netherlands-based Fujitsu Siemens Computers BV NL.
“It’s really been a great year,” Stinson says.
Stinson says the company recently has won contracts with Lockheed-Martin Corp. and Air France, and is on the cusp of closing several more deals.
“The one I am most excited about is in the aerospace industry,” he says. “I can’t say their name yet, but they are the No. 1 company in their industry sector-everyone knows them, they are a household name.”
Stinson admits his biggest contribution to Xelus may be his Rolodex, which contains a Who’s Who of aviation.
Among his dozen affiliations, he belongs to Conquistadores del Cielo, a secretive club whose approximately 50 members are mostly male CEOs in the aviation industry. The club name translates to “conquerors of the sky.”
Members take an annual retreat at a dude ranch in Wyoming. The getaway was described to Fortune in 2001 by member Gordon Bethune, chairman and CEO of Continental Airlines: “It’s a boys’ club. You fly-fish, play tennis. They do rodeos, ride horses, drink too much, drink too much, ride horses, drink too much. Did I mention drinking? It’s kind of fun.”

A flying family

The Stinson family’s contributions to aviation lore date back before the founding of Conquistadores del Cielo in 1937. At his death in 1932, great-uncle Edward Stinson had logged more flight time than any pilot alive, an online history created by the U.S. Centennial of Flight Commission states.
In 1910, 16-year-old Eddie Stinson convinced a fledgling St. Louis aircraft builder to hire him as their test pilot. Eddie crashed it in a field, and received the plane, and its severed wing, as payment for services rendered.
A year later, he emptied his $500 bank account for flight lessons at the Wright Brothers’ school in Dayton, Ohio. For several years thereafter he was a barnstormer and stunt pilot, setting several aviation records and earning as much as $100,000 annually.
Terry Stinson’s great-aunts Katherine and Marjorie also were aviation pioneers. In 1912 Katherine became the fourth woman in the United States to win her pilot’s license, and as “the Flying Schoolgirl” performed at air shows around the country.
In 1920, Eddie Stinson founded the Stinson Aircraft Co., which would build 13,000 aircraft in three decades at its Detroit headquarters. A few thousand models exist today, and Terry Stinson has flown one, as well as another model called the Stinson Station Wagon.
At Textron, Terry Stinson led the company’s Lycoming division, whose engines in the 1930s were used in some planes made by Stinson Aircraft.
Stinson Aircraft also developed the sky hook, an appendage that allowed Stinson airplanes to swoop out of the sky in rural communities and snag mail placed on top of poles.
Flying skipped a generation in Stinson’s family. His father farmed soybeans and corn in Gretna, Neb., and later became a homebuilder. He served in Gen. George Patton’s Third Army in World War II.
Stinson’s formal introduction to flying came in the Air Force’s Reserve Officer Training Corps program at Georgia Institute of Technology. He flew an F-100 fighter-bomber in Vietnam, and continued flying in the Air National Guard until 1997.
He has flown all active U.S. fighters through the F-16 program, and Russian fighters through the Mig-29. He has flown all Bell helicopters, and owns a Beechcraft A-36 Bonanza.

High-tech start

Despite his background in aviation, Stinson’s professional career began in the high-tech world. His first job with Texas Instruments Inc. involved semiconductor manufacturing operations on the shop floor.
From there, he took a job running chip manufacturing in Melbourne, Fla. for the company known today as Harris Corp., which has its R.F. Communications division in Rochester.
He then ran Fairchild Semiconductor Corp.’s operations near Portland, Maine.
In 1973, Connecticut-based United Technologies Corp. recruited him to do operations analysis across its units, a move that would set him up to be recruited by Textron two decades later.
At the UTC division, known today as Hamilton Sundstrand Corp., Stinson ran operations for one of the world’s largest makers of mechanical and electrical systems for aircraft. He then got his first taste of leading a business unit at Elliott Co., a Pittsburgh-area maker of steam turbines and compressors then owned by UTC.
Stinson then took the job that would catch Textron’s attention, returning to Connecticut as president of Hamilton Standard Corp., a $4 billion company with more than 16,000 employees.
Recalling when Rhode Island-based Textron contacted him, Stinson says that it was a difficult decision to leave. But the challenge was too irresistible to pass up. Textron had accumulated a diverse range of companies that loaned money, sold life insurance, built golf carts and designed missile systems. To Stinson fell the task of bringing focus to the conglomerate’s varied interests.
He spent the next four years reconstructing or selling several units. He then took the leadership of Bell Helicopter, which was in a partnership with Boeing Corp. to make the V-22 Osprey.
The Osprey takes off like a helicopter, then tilts its rotors vertically to fly like a prop-engine airplane at more than 300 miles per hour.
The Marine Corps is counting on it as one of its primary troop-transport craft. The Osprey has crashed four times in its development, however, including twice in 2000 that forced the Pentagon to ground it through last summer.
In September 2001, Stinson was replaced as CEO of Bell Helicopter.
Several aviation trade publications reported Textron chairman, president and CEO Lewis Campbell was dissatisfied with the handling of the Osprey program.
“Not true. Any time a CEO departs there is a tendency to sensationalize,” Stinson says. “(The Osprey was) very political, always under fire because of the size of the program and the competition. Running the program was not as difficult as dealing with the political environment in Washington.”
In 2001, Aviation Week called Stinson one of the U.S. aerospace industry’s most respected executives.

Joining Xelus

Retirement did not suit him, he says.
“I didn’t want to get back into big industry,” he says. “I decided I had the opportunity to do anything I wanted to.”
An old friend who was a consultant with McKinsey & Co. called and convinced him to chat with Insight Venture Partners, a venture capital firm in New York City.
“It took a lot of convincing to get me to go down there, but I was fascinated by it,” Stinson says. “I thought it would be fun to do something different, and that I could bring something to high-tech companies which are transitioning from a mentality of growth at any cost, to one of growth along the same parameters of the companies I had worked at before.”
He took a board seat at Xelus. Launched as LPA Software Inc. in 1972 by Lawrence Peckham, Xelus released its first mass-produced software package in 1994. The supply-chain management application found a ready market at Xerox Corp., Eastman Kodak Co. and other Fortune 500 companies.
In 1998, Xelus drew $20 million in venture financing from Insight Venture Partners and two other firms. In July 2001, it raised $15 million more.
Then the Sept. 11 attacks occurred, and like other companies selling to the aviation sector, Xelus retrenched. It pared its work force that autumn from 270 employees to 215, then cut 80 more positions in January 2002. Twenty more left when Xelus spun off LPA Systems Inc. in January 2002.
When Stinson took over, 50 percent of Xelus’ revenue came from the aviation sector. The company had dropped off its high of $33 million in revenue in 2000 to below $30 million in 2002. Analyst firm AMR Research Inc. estimates Xelus and Kirus combined likely logged $32 million to $35 million in revenue last year.
That gives Xelus one-third of the market share of service parts scheduling software, AMR states. But Xelus is running into stiff competition from several companies, including Dallas-based i2 Technologies Inc., MCA Solutions LLC of Philadelphia and Servigistics Inc. in Atlanta.
“It’s a good deal for both parties,” says Larry Lapide, an AMR analyst. “Xelus has a long history in service parts inventory-planning applications and has spent the past four years moving (to become) a more aggressive software-marketing concern.”
“(Kirus) has primarily been a technical shop targeting the product development of reverse-logistics execution software,” he continues. “The two companies already have a joint development project with a telecommunications gorilla, and Kirus currently has sales cycles going with four other Xelus customers.”
Stinson would not reveal the company’s current rate of revenue, but says it is on the way up. More importantly, the company has been in sore need of financial discipline and has improved its profitability, he adds.
“One of the things I brought to this company is the basic business concepts of the Textrons of the world,” Stinson says. “We recognize the importance of technology, but we don’t fall in love with technology. We make a suitable return, and that attitude has really helped a lot.”
Stinson says the company could pull off an initial public offering within three years if Xelus can execute its plans.
Those plans include creating or acquiring software that better tracks the service schedules of field technicians, not just the parts they install or repair. Xelus has had past talks about partnering or merging with other companies that have such technology, says Stanley Beal, executive vice president of sales and marketing.
Company valuations are as low as they may go, but Stinson says Xelus officials feel no pressure to rush an acquisition.
As bad as the economy in Rochester has been, Stinson says it was worse in Dallas and Fort Worth, where a heavy concentration of semiconductor, software and telecom companies took it on the chin in the Internet bust.
“It was absolutely awful,” Stinson recalls. “Every single day you would pick up the (Texas newspapers) and read about a litany of companies falling apart and people losing their jobs.”

Multiple locations

Stinson splits his time between homes in Fort Worth; Northfield, Mass.; and the Rochester area. He would not divulge where he lives locally, nor any family information.
He plans to be here for most of the summer. In January, his office had the look of someone who did not plan on sticking around long, with bare shelves and a paucity of paper. A lone bottle of Budweiser Beer adorned one shelf, a relic of a bygone celebration.
But in June, he had spruced things up with personal mementos and photographs, and appears to have settled in.
For a company that has made a living knocking on the doors of aviation companies, are Xelus managers intimidated by Stinson?
“At times it still is an issue,” Stinson says. “My board members will come in and the conversation is, ‘You live in a different world than we do-you deal on a regular basis with people we can’t even get in to see.'”
But he is learning every day as well-the software business has a different feel from his experience in semiconductors and aviation, he says.
“Just by the nature of the business, technology changes very quickly,” Stinson says. “It is less formal and more fluid. The personalities are entirely different, and it has a much younger work force.”
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06/06/03 (C) Rochester Business Journal