Executive finds his model is the right pick

PICS Telecom Corp. president Timothy Williams is not that anxious to tout his company.
Wrapping up a more than hour-long interview, he mentions only in passing that his 80-worker company is establishing a sales and distribution branch in Bristol, England, to service a fast-growing international business with telecom carriers in Europe and Asia.
It is clear he has given little thought to how impressive an expansion into international markets might sound. But, as Williams talks about the several new people he hired recently to set up a sales office and distribution center there, his excitement about the project also is clear.
Williams, 47, is proud of PICS Telecom’s achievements. He declines to state the privately owned company’s revenues, but a certain satisfaction is evident when he says it will reach the $100 million mark soon.
His reticence about PICS Telecom’s success is partly because he is uncomfortable with self-promotion, he says. He looks at it as boastful and a little unseemly. But he also sees bragging about the firm’s success as unnecessary. The company is doing well without publicity, Williams says. It needs new sales help more than it needs publicity.
“I think we could sell whatever we have, if we had the people,” he says. “I’d hire 10 right now, if I could find the right people.”
His preferred sales force candidates are young, eager to learn and-like Williams himself when he entered the business a dozen years ago-not necessarily schooled in telecom lore.

Strong business model

Arunas Chesonis, chairman and CEO of PaeTec Communications Inc., fairly froths with enthusiasm over PICS Telecom.
“(Williams) has a great business. It’s unique. He’s really taken advantage of the telecom bubble,” Chesonis says. “He sells to everybody.”
Chesonis’ enthusiasm is understandable. As a provider of voice and broadband services to businesses in 27 U.S. markets, PaeTec buys a fair amount of pricey telecom hardware. Telecom equipment is not impressive to look at. Much of it looks like an industrial refrigerator packed with computer cards. But some telecom cards go for $150,000 or more.
PICS Telecom’s prices can be as much as 50 percent lower than prices offered by original equipment manufacturers such as Lucent Technologies Inc. or Cisco Systems Inc.-even though some equipment the company sells is unopened in boxes from those manufacturers.
The used equipment he sells generally is more reliable than the new stuff, Williams claims. Customers such as Chesonis might not know that, however, because they never see the bad new equipment. The ISO-certified PICS Telecom tests everything it sells before shipping it out, even new equipment.
PICS Telecom is not the only company selling used equipment, but Williams believes it is the leader in the field. He figures he has as many as 10 serious competitors, whom he declined to name. An online search of the words “used telecom equipment” turns up pages of liquidators, salvagers, recyclers and rebuilders and online auction sites for used telecom hardware. A number, including PICS Telecom, also advertise new equipment.
But PICS Telecom operates differently, Williams says. The company, as Chesonis suggests, is unique. But in Williams’ view it has not particularly taken advantage of the telecom bubble.
Williams concedes that in the late 1990s telecom firms worldwide overbuilt networks and overbought hardware and that, starting roughly in 2000, it became evident many were far too optimistic in projecting growth. It is also true, he says, that there were and are bargains to be had in the overbuilt telecom infrastructure.
But he insists his company was not built on the premise of taking advantage of that happenstance. PICS Telecom has not especially profited from the telecom bubble, he says. And neither will it be particularly disadvantaged when stocks of surplus equipment purchased during the bubble are used up.
Williams acquired the company in 1992, well before the telecom boom and subsequent bust.
There always will be carriers with surplus equipment who can profit from offloading it and others eager to acquire that equipment. Williams believes he has put PICS Telecom in position to be the conduit of choice for such transfers to happen.
His business model works because there is something in it for everyone, Williams says. Firms that have taken usable equipment out of service can see a financial return instead of seeing it gather dust. Firms that can use the equipment can acquire it at a healthy discount. And PICS Telecom can make a tidy profit.
The key to the operation, Williams says, is what he believes to be a unique business model in the industry.

Not a liquidator

Despite how it might look, Williams says, his company is not a liquidator. It is not even a buyer of surplus. It is an inventory manager or-in the phrase Williams favors-an investment recovery specialist.
This involves a different business model.
No matter how tempting the price, Williams says, PICS Telecom never buys any equipment-not a single card or cable. Everything the company sells is taken on consignment. The firm has contractual relationships with some 60 carriers. Williams declines to identify them, but they include Baby Bells, well-known competitive local exchange carriers, Internet service providers and others.
If a client has excess inventory-whether installed or new-a PICS Telecom team goes to the site, catalogs it, packs it and arranges to ship the material to its Gates facility. Once it arrives at the facility, it is offloaded, shelved, tested, packaged or repackaged and eventually shipped out to a customer.
For Williams, doing investment recovery, as opposed to buying and selling as a middleman, is a strict business model.
“(Manufacturers) have offered me the chance to become a distributor. I’ve turned them down. I want our partners to always be our sole source of supply,” he says. “I want everybody here to always have the needs of our partners first in their minds. If we bought (equipment) and then sold it, it would detract from our ability to manage our partners’ inventory.”
In developing PICS Telecom’s strategy, Williams found a way through the industry’s tough past few years, says Steve Dubnik, Choice One Communications Inc. president, chairman and CEO, whose company buys from PICS Telecom and sells surplus equipment on consignment through PICS.
“(Williams) has put together a good business and a good plan,” Dubnik says.
Williams started developing the PICS Telecom model in 1996 after a carrier, which he declines to name, approached him with the idea of taking some used equipment on consignment. When that deal worked out, PICS Telecom made similar arrangements with others. The company’s current investment recovery model evolved from those beginnings over the past eight years, Williams says.

His own business

Williams bought PICS Telecom in 1992 after finishing a stint as a Chase Lincoln First Bank N.A. vice president working in mergers and acquisitions. Owning his own business had been a lifelong goal. The telecom equipment firm was his second stab at it.
A Rochester native, Williams graduated with bachelor of arts and bachelor of science degrees in business administration from Bucknell University in Lewisburg, Pa. His first job after graduating was selling janitorial supplies in Westchester County, Pa. He next worked as a salesman for a family-owned copier business in Burlington, Vt.
After nine months in Vermont, Williams decided to come back to Rochester to start his own company, Williams Energy Systems Inc. The energy-management firm sold computer-controlled systems to regulate electric use and heating and cooling to businesses.
Initially the firm did well enough, Williams says. But it was in the early 1980s as the energy crisis that had begun with mid-1970s oil shortages was peaking. As the decade progressed, demand dropped off. The systems he sold worked well enough, Williams says. But as energy and fuel prices fell so did businesses’ interest in investing in computer-controlled energy systems.
In the mid-1980s Williams started to work toward an MBA in the University of Rochester’s William E. Simon Graduate School of Business Administration’s executive degree program.
“I felt I was strong in sales but I needed a better financial background,” Williams says.
In a deliberately arranged lineup meant to kick his life into another direction, he graduated from the Simon School program in June 1986, married his wife in July and sold Williams Energy Systems in August.
It was time to move on, Williams says. The energy management business by this time was making a living for him but only “just about breaking even.”
For the next two years, Williams worked with a local man, now retired, who made a living as a matchmaker between development-stage companies and venture capital investors. Learning the ins and outs of negotiating such deals for Williams was like getting a Ph.D. in business, he says.
In 1988, Williams went to Chase, handling mergers and acquisitions in Upstate New York and some nearby states. Among those he worked with was Lawrence Wyland, the owner of a Rochester company for whom Williams helped arrange the acquisition of a Pennsylvania firm.
By 1991, Williams was chafing at the strictures of corporate life and aching to try running his own business again.
“I wanted to build something,” he says. “It’s something I always thought I could do.”
Williams was looking around for opportunities when Wyland called him. Wyland’s business, which then employed 190, was in trouble. Wyland at the time ran three firms: PICS Telecom, the Pennsylvania company and a third local operation.
The Pennsylvania firm, a business acquired from a larger company that rebuilt old telephones, was dragging the other operations down, Wyland says. He wanted Williams to come in and do a workout of the strapped operations.
“I thought he was a pretty sharp guy when I worked with him when he was at Chase,” says Wyland, who retired several years ago, selling his interest in PICS Telecom to Williams.

Taking a leap

Williams agreed to do a workout. By the time he decided to buy into the firm in 1992, one of Wyland’s three original companies was liquidated, another was sold off and only PICS Telecom-then a business selling used plug-in cards to Baby Bells-was left. Wyland and Williams were its only employees.
The move was something of a leap, Williams says. He and Betsy-now parents of a 16-year-old son and two daughters, ages 13 and 12-had just had their third child and moved to a new home in Pittsford. Williams borrowed money from family and on his credit cards to help finance the PICS Telecom purchase.
But while he portrays the move as a leap, his former partner, Wyland, sees Williams as a careful thinker who seldom takes any action without fully considering the consequences.
“He’s kind of the opposite of me. I tend to jump right into things, sometimes before I’m really ready to go,” Wyland says. “So I guess that worked out pretty well in the end. We both worked pretty hard on selling and pretty soon we hired a third guy.”
Eventually, Wyland says, the business moved into other kinds of used equipment and started dealing with other types of telecom customers.
When that first carrier asked them to work on consignment, the company found a business model that worked.
“We realized pretty quickly that was a good way to go and started approaching other carriers,” Wyland says. “It was a little slow to get started, but before long it worked.”
Wyland, 65, decided to retire in 1998 after a serious accident laid him up with a number of bone fractures. During the weeks when he was out, “financially it was like I was still going to work every day. Tim was very understanding. He was very good to me,” Wyland says.

Open environment

The firm’s headquarters is tucked almost out of sight at the back end of a lot in a mixed light industrial and commercial district on Lyell Avenue, just outside the city limits and roughly a block from the Erie Canal. A well-lit, pleasantly decorated and rather spacious interior is a surprise after passing by an unassuming front. The 90,000-square-foot facility formerly housed a lawnmower-blade factory.
A front office taking up a few thousand square feet at the front of the facility is largely open. This is by design. Williams says managers at the firm eschew titles. All employees are involved to some extent in sales.
Williams, whose off-work pastimes mostly involve his children’s soccer matches and ski races, says he tries to look at the business as a family.
“We don’t use titles,” Williams says. “We argue and fight. There are no assigned responsibilities. If there are disagreements, we get them out in the open and work them out. People have to have respect. I want to enjoy coming to work and I want everybody who works here to enjoy coming to work.”
([email protected] / 585-546-8303)

07/02/04 (C) Rochester Business Journal