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Frank Manning, of storied modem-maker Zoom Technologies Inc., is about to have his cake and eat it too.
Zoom, one of the oldest technology plays in the region, is close to a deal to merge with a Beijing-based holding company called Leimone United. Once that happens, it will spin out Zoom Telephonics (the company’s original name) as an over-the-counter publicly traded entity, holding onto all of its assets, IP, branding and employees.
While it has been working on this deal for the past 18 months, Zoom has also been working on new networking products that Manning hopes will lift it out of the modem-market doldrums.
As part of the merger, Zoom Technologies (Nasdaq: ZOOM) shareholders will get 100 percent ownership of Zoom Telephonics and 30.6 percent ownership of Leimone. The new Zoom could also get a strong entry point into the soaring Chinese telecom market, Manning said.
“Why would Leimone do that deal?” Manning asked, stating the obvious question. Leimone gets to use the Zoom branding, and Leimone in one fell swoop becomes a Nasdaq-listed company trading on a U.S. market.
Boston-based Zoom soared to the heights of success in the late 1990s selling dialup modems, including one of the most popular products operating at what is still the fastest dial-up speed possible — 56 kilobits per second. In May 1996, Zoom stock was trading for a stratospheric $132.50 per share.
“In the late ’90s we were a $100 million per year company,” Manning said. “It kills me that we aren’t profitable (now).”
Manning, who co-founded Zoom in 1977, admits that one of the reasons the company has had only a single profitable quarter in the last six years is because it bet on the wrong horse. In the early 2000s Manning saw that DSL and broadband modems were the next step for Zoom. However, the giant companies were supplying switches to the telcos, and cable companies supplied their own broadband modems, which were bundled with their service at little or no cost to consumers. There was almost no incentive for consumers to go to the big box stores — where Zoom’s products are still on display — and buy their own broadband modem.
Now Manning has a strategy to right that wrong move, and Zoom is about to launch a trio of new product lines. The first is a wireless broadband modem, which Zoom is making in both GSM and CDMA flavors for laptop users who are clients of either AT&T Inc. or Verizon Communications Inc.
Zoom is also about to roll out a wireless router that uses a customer’s existing wireless broadband modem and allows them to network any number of wireless devices as long as they have a connection to a 3G cell tower.
“If you are traveling and want to bring your children’s PS3, for example, but aren’t sure the place you are going has wireless Internet access, you could just set this router up and get on the Net,” Manning said.
Yankee Group principal analyst Vince Vittore says Zoom still has a tough market to crack. “The biggest challenge is to get consumer recognition that you can buy an after-market modem in that space,” Vittore said.
“The carriers have done a good job creating a subsidized model from the handset world and carrying it over to that market.”
Manning may be most excited about a whole new use for its Internet connection expertise: a device that brings “a full, rich, Internet experience” to HDTV. While he isn’t ready to release details, he did say it is a set-top box that is controlled remotely. Unlike the set-top boxes from, say, Netflix, users won’t be restricted to going to just one specialty website, he said.
“One of Zoom’s biggest assets is its wonderful market channel, and our hope is that we can easily bring these products into our channel and dramatically increase our revenues,” Manning said.
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