Case Study: The National League

The company specializes in DirecTV and cable installations, but in March 2005 it purchased Florida-based Digital Interiors and planted its foot firmly in the home integration turf. 180 Connect's plan is simple: to leverage its already-expansive network of satellite locations, field technicians and support staff into the digital home space. The company has more than 3,700 field technicians in 104 branch offices nationwide, putting it in a prime position to work with both local and national home builders.

"We were looking at diversifying revenue streams, and we decided the home integration market was very fragmented. We thought it would be a good expansion of our capabilities," says Nick Wainwright, president of 180 Connect. "We have such a lot of branch operations that if we need to grow the interiors operations, we have lots of places to grow it."

The company was born from the ashes of the 2002 bankruptcy of Viasource Communications, Fort Lauderdale, Fla. The company was rebranded as 180 Connect and trades publicly on the Toronto Stock Exchange. For the first nine months of 2005, revenue was $75.5 million, up 25.8 percent over the same period in 2004.

In November 2004, 180 Connect brought on Wainwright as president, and at the end of last year, it moved its corporate headquarters from Florida to Woodbury, N.Y. Customer-service and help-desk functions for the headquarters and 104 branch locations are handled at the company's Denver offices, giving it a truly national footprint. 180 Connect enters the game during the building and wiring phase of a housing development project. Single-family production homes are the integrator's sweet spot.

Kurt Scherf, principal analyst at Parks Associates, says 180 Connect's strength lies in its size and scope. "The comfort for the home builder to embrace some advanced networking and entertainment options is probably going to be enhanced by knowing they have this nationwide company with significant reach supporting them," Scherf says.

And with a national company comes a more uniform service offering. "I think the whole notion of having standardized training and having integrators that have the same background from one region to another would provide a very consistent product from one area to another," Scherf says. "Integrator training and certification is probably important for builders, particularly as they move to enhance their offerings to accommodate consumers' entertainment, communications and connectivity needs."

Bidding for projects against smaller local integrators pits the company against stiff competition, but it's worth it, says Wainwright.

"It's one of the reasons we wanted to expand into this market; it's quite a bit fragmented. There are lots and lots of small mom-and-pop outfits," he says. "We can serve a number of builders spread across the country. We're intending to grow the business organically by way of our own management as well as a number of acquisitions."

Scherf says while mom-and-pop integrators are vital to a thriving U.S. market, 180 Connect's national presence will be appealing to national builders such as 180 Connect client Richmond American Homes, which is building developments from Maryland to Las Vegas to Southern California.

When 180 Connect is brought in to do an integration project, the work can range from installing cable to wiring a home for a security system, audio system or home theater system.

"This is the beauty of our operation. We can provide a complete end-to-end package of services from engineering design through to the home integration. Of course if we don't do the engineering design and the community is served by something like Time Warner, we can do cable install and digital interior," Wainwright says.

The "back package" includes everything that the builder chooses to incorporate in the home network. For example, a builder may choose to include CAT 5 wiring to bring Internet access to every room or install speaker wire throughout each house in a development. Those features can then be pitched by the builder as assets standard to each home. Once the house has a buyer, 180 Connect steps in and offers everything from security systems to plasma televisions.

"What we try and do is sell a lifestyle. Depending on your age, gender, life, you may have different requirements," Wainwright says. "You may be massive on giving barbecues; outdoor speakers would probably suit your requirements. Or you're a huge movie buff. Do you want the latest, greatest and biggest TV with a sound system?"

Customers are shown products in model homes, and the sales can be incorporated into mortgages. 180 Connect makes sure everything is up and ready to be used before the homeowner moves in. All connections are pre-established. Televisions are hooked up with cable and any video systems the customer purchases. Then 180 Connect meets with customers to show them how it all works and gives contact information for the local branch office and the Denver help desk.

In addition to sales, setup and service, 180 Connect resells several name-brand product lines. Security systems, for example, are provided by Honeywell and GE. The choice is sometimes made by the builder, which may have a standing contract with either company. DVD players, stereo receivers and other home theater products come from Yamaha. Niles and JLB provide the speaker product lines. 180 Connect uses televisions from LG and Samsung, intercoms from NuTone and Logitech remote controls.

180 Connect today generates most of its revenue from its DirecTV installation business, but Wainwright says home wiring will be another big sales driver in the near future.

"We are working on a number of very large-scale contracts that we're hoping will come to fruition late in 2006 and gain steam through 2007 and 2008," Wainwright says. "You can develop the work early, but it's not until they actually start producing the homes that you start seeing the revenue. We've got many thousands of homes under contract."

In the meantime, 180 Connect is working with homeowners for whom the construction phase is already in the past.

"We're just beginning to look at the retrofit business now. The reality is that there are far more existing homes than there are new homes being built, and the majority of those homes will not have the automation, properly plugged-in home theaters and control centers," Wainwright says.

"Without a doubt it will be more expensive to retrofit an existing home than it is to wire a home that's being built. How do we do it cost-effectively? That's where we are right now," he says. "I think there's a good marketplace for us out there. It's just getting the right pricing."