Friday » November 2 » 2001

As others founder, Wong forges ahead

SS8 Networks finds $62M for acquisition, expansion plans

Bert Hill

The Ottawa Citizen

Friday, November 02, 2001

Henry Wong, the unconventional serial entrepreneur behind a Kanata telecom startup, has done it again.

SS8 Networks, his fifth company, has just bought a profitable division of a troubled U.S. equipment maker for a bargain price. He also raised $62 million U.S. in new venture capital to finance the deal and future growth.

When other startups are struggling to survive, Mr. Wong said SS8 has found a new path through the telecommunication industry collapse.

"Whether you call it a hiccup or a nuclear winter, there is just no way to go public for at least two years in this business climate," he said. "But we think we can see an IPO (initial public offering of stock) in a year for a profitable $100-million a year company with 450 employees."

Mr. Wong certainly has blazed a different trail than most people who start technology startups. Born in Hong Kong, he started and sold several companies in California to Cisco Systems and other industry giants.

Two years ago he came to Canada, in a reverse of the so-called brain drain, to start his latest company, SS8 because he like the cold climate and the work ethic of Canadian engineers.

He said the dry cold and well-insulated and heated Ontario homes are good for his arthritis. And there is nothing like a cold Ottawa winter day to keep engineers working through lunch hours in their cubicles.

SS8 has about 140 employees divided between research operations in Kanata and corporate and sales in San Jose.

SS8 bought the enhanced services division of ADC Telecommunications of Minneapolis for $45 million cash.

ADC warned yesterday that it will miss sales targets by more than 10 per cent and losses will be twice as high as expected in the current quarter.

It has cut 40 per cent of a 22,500-person workforce. The ADC stock, which has fallen 75 per cent this year, fell another five per cent yesterday.

Mr. Wong said the ADC deal brings technology which will allow SS8 "to provide solutions to old world and new world telecommunication customers."

He said if SS8 had attempted to buy the ADC division two years ago, it would have paid three to four times the annual sales of $100 million.

"We get an operation that generates $15 million in free cash annual for 10 cents on the dollar we would have had to pay last year."

SS8 raised $62 million U.S. in new funding. Warburg Pincus, a U.S. private equity firm, lead the round with a $47 million stake. Other earlier SS8 investors including Woodside Fund, Onset Ventures and CDP Sofinov also participated.

Mr. Wong said he is now looking for a sixth business to start.

He recently brought in a seasoned industry executive to take over day-to-day operations. He continues as the non-executive chairman.

Grant Wakelin, the new CEO, said the combination of technology "creates a global leader capable of providing a full range of services" for new internet-based and traditional network operators.

SS8 said no layoffs are planned as the company integrates operations. It will have a corporate headquarters in San Jose and research and development operations in Kanata and Shelton, Connecticut.