Q&A With Utah Scientific's Tom Harmon

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Following a wave of
mergers that has seen a number of manufacturers swallowed up by larger
companies,
Utah Scientific CEO Tom Harmon calls his
company "the only specialty shop, the last of the independent router/master-control
guys." Harmon talked to HD Update's
George Winslow about how his firm is coping with the economy and why he
believes its independent status is actually a competitive advantage. An edited
transcript follows.

MCN: How has the economy changed some of your
strategies for helping broadcasters upgrade to high-definition?

Tom Harmon: Given
the economy, people are moving forward with HD upgrades but not as aggressively
as they were before the economy slowed down. So, we continue to try to position
our products not as a cheap solution, but as an economical solution, and I
think we've hit a sweet spot in terms of price and performance.

Tom Harmon

We also continue to tweak our [3 Gigabits-per-second] initiatives. Fortunately
for us, the core of our router was designed to be 3 Gbps from day one. We
recently had an HD install in Tucson.
In that case, we were able to upgrade the router so they could handle 3 Gbps just
by changing input and output cards.

We are also putting a lot of effort into working with the
channels and station groups. Most of the groups have established some kind of
group strategy for HD and their transition to HD and we've put a lot of energy
into working with them on that.

MCN: Any signs that the economy might be
improving?

TH: I really
believe we will see a good tick up in the fourth quarter. The activity we have
beginning in September looks really, really good.

And there are a lot of things that have been postponed that
we really believe will start moving soon. So, I think we will see an uptick
towards the end of the year.

MCN: You mentioned 3-Gbps technologies. Are you
seeing a lot of demand for those?

TH: I don't know if
it is a demand as much as it is a future-proofing. At this point, you would be
kind of foolish as an engineer to buy something that isn't 3 Gbps.

MCN: We are coming up on IBC in Amsterdam in September. How do you see that market
this year?

TH: I think it
will be relatively scaled back. I hear other people are pulling out of the show.
IBC is typically a slow show in the sense
that there are not huge numbers like NAB and
I think IBC will continue in that vein this
year.

We bought a company in Norway
last October and we're really launching a European initiative. So we are pretty
excited about IBC this year.

MCN: In this economic climate, what new
products are doing particularly well?

TH: A year ago at
NAB, we introduced a 1056 by 1056 router [the
UTAH-400/XL
]. It is the
most compact router in the industry. The fact that our closest competitor takes
up at least two equipment racks to do what we are doing in 40 rack units means
that it is getting a lot of attention and has been very successful.

We are starting to see a revival in that side of the business.
We have at least three active projects here in the States and two in Europe
for that size router. That is one of the reasons why I think the market is coming
back.

At NAB, we rolled out our [UTAH-100 Professional Products
series.] That was the result of an initiative here in Salt
Lake and the acquisition of the
company in Norway.

We've never really been successful in launching a router
line [smaller than 32 by 32] in the history of the company. But [with the
UTAH-100 series] we now have a full 8 by 8 to 32 by 32 complementary product
line. It is getting a lot of traction here in the States and it is starting to get
some interest in Europe.

I don't want to sound like we are focused on all the cheap
stuff but right now the people with the money are looking to spend in the $20,000
to $30,000 instead of the $60,000 to $80,000 range. We are doing everything we
can to appeal to that business because we have a firm belief here that is once
you are a Utah customer, you stay
a Utah customer. If we can get our
foot in the door with their HD initiatives on the low end, when they are ready to
move to a higher end system we believe we will be the logical choice.

MCN: You also highlighted strong demand for
some of your big routers. What do you attribute that to?

TH: I think it
comes down to the fact that we are finally seeing a real transition to HD. Traditionally,
we saw maybe one opportunity a year [for those kinds of products] but the year
before last we had 15 opportunities.

That was what pushed us to design [the UTAH-400XL.]

MCN: What are some of challenges in specializing,
as you do, in master control and routers?

TH: With the
acquisition of Pro-Bel [by Snell & Wilcox], NVISION [by Miranda] and others
by some of our larger competitors, we have been left in the very unique position
of being the only specialty shop, the last of the independent router/master-control
guys.

Here's what I tell customers about that: If you go to Wal-Mart,
Kmart or Target, you can buy pretty much anything you want. But if you are a
true purist, if you are a hard-core bicyclist, you are going to go to the bicycle
shop and buy a top-of-line, best-of-breed bicycle with the best support you can
buy.

If you look at our competitors and their broad offering of
product, they tend to become almost like a warehouse store. What is unique
about Utah, from myself down, through all our sales and service people, is that
we know and understand two things very, very well -- master control and routing
and how that works into the infrastructure. We've been in that market for 30 years.
Our expertise in those areas is very deep and very broad and that puts us in a
very unique position.

We are also unique in that sense that we have no bank debt.
I don't have to service any debt. I don't have to worry about the bank coming
down and calling my loan due. And I don't have venture-capital money that I
have to appeal to every day. We have a very unique independent ownership and I
don't spend my time on exit strategies here. I can work on making the company
better.

We also have a huge advantage in customer service. Our
products have a 10 warranty. We have 24/7 phone support. We have no service
contracts. So if you need help at two in the morning, you can call our after-hours
number and you will get a human being on the phone.

And the person that answers the phone can service every
product we've ever delivered. Once again, we just won [the 2009 Customer Value
Leadership Award] from Frost & Sullivan.

MCN: As you look forward, are there some areas
where you're broadening your product line?

TH: We've
invested quite a bit of money in moving into the [Internet protocol] space and
I just got a notice today that we are just one step away from having our patent
approved for real time control of an Ethernet switch.

As a router manufacturer, you can either acquiesce to Cisco [Systems]
and the whole IT side of the business, or you can do something about it. A lot
of Cisco's initiatives now are based around video and if we think we're immune
to that, we're crazy.

I won't say it is our wildest seller right now but it
is one of the most interesting products. We have a cable channel that just
installed two of them. They've using to manage incoming feeds and we think it
has potential outside of broadcast.

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