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These articles by Barbara Fox were prepared for the January 21, 2004 issue of U.S. 1 Newspaper. All rights reserved.
New CEO’s Plan For Digital 5
The key to being successful, says Jodie Hughes, the new CEO of Digital 5 Inc., is to have the right core competencies in the right place and at the right price. Based at Quakerbridge Executive Center, Digital 5 has cut 10 jobs, but this was not a downsizing, claims Hughes, merely a restructuring to get ready for growth.
"We are planning to bolster our core competency here," says Hughes, "and to take the skillset mix and upgrade it. We are leaving the specialized skills that are not in our core competency to other areas."
Digital 5’s products enable both wireless and wired sharing of content among networked consumer electronics devices. It provides software and system intellectual property to consumer electronic, personal computer, and network product manufacturers.
Following the trend to globalization, Hughes has sent jobs to Taiwan and India, but he says he has long been an advocate of trying to keep jobs in the United States. "I was in a group in California to stem that kind of flow," says Hughes, who recently moved here from the West Coast. "The key is to specialize in the areas that make you most worthy of expense here, rather than to fight toe to toe with guys who can do it less expensively.
"In New Jersey there is a knowledge base that gives us a competitive advantage and is clearly worth the money. The talent pool, between the Sarnoff Corporation and Bell Labs, has jelled this company, so that we are the leader and have first advantage in the market over all our competition," says Hughes. "So we wanted to maximize our location here but also take advantage of scalability overseas." In India Digital 5 can do back-end software, and Hughes plans to tap companies in Taiwan that make circuit boards.
The reason for this restructuring is that he will change Digital 5’s focus from what he calls "shoebox media" so that it also does business with the entertainment giants. Right now Digital 5 can link downloaded music and pictures and network them wirelessly between the computer, a DVD, and the television monitor. But consumers are using it mostly to organize photos and videos they took themselves.
Hughes wants to add a server business and sell software to premium content businesses that charge to download video and audio content. Potential clients are iTunes, Rhapsody, Napster (now legitimate), MovieLink, and CinemaNow. Rhapsody, for instance, charges $9.99 a month for unlimited songs that you can download and burn on your own CD for 69 cents a song, and it also offers 750 radio stations. Hughes has also announced a partnership with AOL, so that AOL users can listen to AOL digital radio on their main stereo, making AOL radio function like a traditional station.
"My charter is to grow the company beyond the niche market of shoebox media and beyond the embedded platform into a full software and services company. Not only do we want to sell to DVD makers, but also to the content providers and to provide services to the content providers," says Hughes.
He says he has three kinds of competitors: Big companies like Sony with their own internal developers, other small private companies, and shareware. He points out that Digital 5 has the advantage of not being a start-up, like the other small firms. "We were first to market, and we have our own set of customers," says Hughes.
Founded in 1993 in Pennsylvania as Sycom Technologies, this company moved to New Jersey in 1996. The founder, Ari Naim (Drexel, Class of 1985, with a doctoral degree in information theory and artificial intelligence from Drexel) started out with office applications – digital voice recorders that were manufactured in Korea, plus software that could download voice transmission into a computer file. These Total Recall products cost $99 and up. Then Naim offered a multimedia Internet-based application that translated web pages to recordings for car radios (U.S. 1, October 9, 1996). Hughes says that none of these products are being manufactured now, but that Naim has a seat on the board at Digital 5.
The firm was voted most likely to go public at the 1998 New Jersey Venture Fair. When Ron Stevens was hired as CEO in 1999, he changed the business model, and in 2002 the company reported it had 48 people at Quakerbridge Executive Center and 20 more employees in California and India. One of the products that Stevens nurtured was for MP3 players, but that business moved to Taiwan. His major product was Netplay, which can be added to a DVD player made by Gateway, Apex, and Go.Video to extract digital entertainment content from a PC.
Hughes was recruited by one of the investors, Rich Harris of D.C.-based SpaceVest. (The other investors include Allen Ferguson of 3i, Phillips, and Texas Instruments.)
One of his first moves was to change the name of Netplay, which was not trademarkable, to D5. For D5 the consumer takes a $199 DVD player with a card slot, puts in a wireless card and a piece of software from Digital 5, and the software can read all the files on the PC that are content related, categorize them in a database, automatically download their indexes, and play them on the DVD. This can be accomplished wirelessly from any room in the house.
Hughes wants to add the ability to interface to the premium music providers and to real-time digital radio. "The services give you thousands of titles," says Hughes. "You can automatically call up your computer from your telephone, and choose the songs you want to play from your computer, using the Digital 5 database and wireless connections to the PC. One menu has all the songs on your PC and you select what you want to play. We also support your playlists – however you organize them."
With digital radio, you can buy the song you are listening to, or skip the song you are listening to. If you want to skip that song the web-based radio server will start a new track for you. "Our device allows you to play high end radio, not only on the PC, but also on the stereo," he says. "AOL radio is now free for AOL users, and XM and Sirius Satellite Radio is available now only on car radios, but we are working with XM and Sirius to allow their radio to play on the consumer’s PC or stereo system."
Hughes has moved here with his wife, who has worked in finance, and they have two sons and a daughter attending college in California. With Jodie as his first name (after his grandfather, an Alabama farmer), Hughes says his consciousness has been raised about the way women are treated. For instance, he tells of being recruited for a class and receiving two envelopes, one addressed to Ms. Jodie Hughes, and the other to Mr. Jodie Hughes. Mr. Hughes was invited to a class on How To Channel Your Aggression in the Workplace, but Ms. Hughes was invited to one on How to Harness Your Emotions in the Workplace. "It was the same exact course, teacher, and syllabus," he says. "That was amazing to me."
As a result of his occasionally being treated like a woman, Hughes says, "I raised my daughter to be an independent thinker and not be validated by men."
Hughes was chosen for the CEO’s job – which had remained vacant for six months – because his background encompasses hardware, software, and the content industry. He grew up in San Francisco where his father was head buyer for Food Machinery Incorporated (now FMC) and graduated in electrical engineering and computer science from the University of Santa Clara in 1978.
Among his first jobs was at a startup making word processors. When he was 28, the current CEO of TIVO, Mike Ramsay, was his boss at Convergent Technologies, a fast-growing firm that pioneered in small notebook computers and hub networks. He has also worked at Sony Electronics, Western Digital, and Sigma Designs. His last job was as president and chief operating officer of TeleCruz Technology, a maker of system-on-chip and middleware software for interactive television using TV sets not set-top boxes.
"The key to them finding me was that I was looking to start a company like this," says Hughes.
This company is scalable, he says. "We have 33 people here, 50 people total, and we expect to grow here by about 50 percent. We will probably grow from 25 to 50 in India, and are opening a Taiwan office."
Digital 5 is a candidate for an IPO. "We are well positioned, cash flow positive, and the market will be on the upside, but we are in a growing space," says Hughes. "But we will be a prime acquisition target when we turn profitable at the end of this year, and I wouldn’t be surprised if somebody didn’t make a move on that."
They call it Forge, a creative space for creative interaction between clients and employees, and also for staging events. It’s part of Pequod Communications expansion on Alexander Road, an expansion of a business that started in 1988, when seven Princeton University sophomores opened a bookstore and copy shop on Nassau Street.
When they graduated in 1990 James Robertson and Andre Liu decided to stay in Princeton. Now they have 30 employees in two locations, and this week they are expanding their headquarters by adding 5,000 square feet for a total of 15,000 feet, and opening a creative studio.
The Forge space will hold five staffers, and Robertson and Liu look forward to scheduling meetings of creative groups of from 25 to 60 people (in workshop mode) and 75 people (in cocktail or celebration mode). The gala opening of this "spatially inspirational" space is Friday, January 23, 4 to 7 p.m. Refreshments will be served, and the speeches start at 5 p.m. For an invitation, E-mail: firstname.lastname@example.org.
"From our humble beginnings in the ’80s as a copy center run by a couple of college kids, we have embarked on a journey to become an ever more important presence in our industry," says Liu, noting that Pequod combines advanced digital technology with traditional methods.
In addition to its headquarters on Alexander Road, it has a retail location inside the Princeton University Store. "While many know us solely as a printing company, we have increasingly been providing marketing, branding, and custom web solutions to clients, effectively expanding our partnership role with them far beyond that of simply printing," says Liu.
On a practical level, Pequod needed more room. "When we began to consider expansion, we immediately recognized what a new, creative environment could mean. We want Forge to be as spatially inspirational to our people as our people are to our clients."
The decor for Forge is minimal, because one of the goals for the space is to allow it to change, says Robertson. For the opening reception, orchids from Liu’s collection will be featured, as will paintings by his cousin. Do you want to hold an event there? A proposed event should meet one of two criteria – that it be fun and/or that it be related to graphic creativity. For instance, the partners are thinking of offering arts companies a congenial place to hold their post-theater parties.
"We don’t want to limit the opportunities by myopic vision," says Robertson. "One of the advantages of our company is that out of 30 people we represent 16 different companies."
Says Liu: "Forge gives us an opportunity to have the rest of the world view us as we view ourselves."
Web Services Inc. moved this month from 55 Princeton-Hightstown Road to an incubator building on Princeton University’s Forrestal Campus. Founded by brothers Harrison and Bill Uhl in 1996 to do Internet technology, the company is a now full service shop that can do everything from planning and installing networks and Internet access – by setting up business servers – to onsite and remote support of a client’s Windows desktop computers.
The Uhls have a new product, FileMirror, which is supported by its decentralized computer infrastructure. FileMirror has automatic off-site backups and content distribution, and it offers "set and forget" convenience. The fact that this product has multiple backup sites makes it more secure.
The Uhls developed FileMirror for its Small Business Server software collection. Small and mid-size businesses can select one or more services from group that includes E-mail; database, fax, or backup services; firewall/Internet gateway; and other infrastructure services.
Bill Uhl, vice president of engineering, says that his company can charge an affordable price for these individual or bundled services because they are built from open source "free" software. "Our value proposition is that we have taken the time to engineer all the pieces, and to get all the pieces to ‘play nice’ with each other and with any Windows computers connected to them."
The costs have been spread across many customers. "Still," says Uhl, "many people want to take things one step at a time, and FileMirror is a simple place to start. Everyone needs to backup their computers, and FileMirror is as painless as it gets. That it is ‘pay as you go’ eliminates a lot of risk on our customers’ behalf."
International Flavors & Fragrances Inc. announced earlier this month that it will expand its regional center in Dayton by building a culinary and bakery center, expected to be completed by the end of this year. It will be the North American headquarters for the company’s global "Culinessence" program, where chefs around the world work with flavorists and scientists to produce better flavor technology.
"The Culinary & Bakery Center will affect current and future growth in the savory and bakery categories, particularly with our increased focus on foodservice," says Jim Dunsdon, senior vice president.
The Docks Corner Road office does manufacturing, sales, and marketing for the flavor division of IFF.
The architectural engineering firm moved from 1,100 square feet at 1580 Reed Road to Riverview Plaza in Trenton. Phone and fax are new. The new space is economically better, says Robert Kowalczyk, project manager, "and we wanted to be in the city."
Founded in 1953, the firm focuses on civil and environmental projects. Its home base is in southwestern Pennsylvania, and it has 500 employees in mid-Atlantic regional offices.
Derma Sciences spent $2.6 million to buy the Texas-based wound-care manufacturing operations of Kimberly-Clark. It will move those operations to a plant in Toronto this year.
CEO Edward J. Quilty says the products he bought usually have annual revenues of about $2 million. The manufacturing equipment is worth $1.6 million, says Quilty, and the inventory of wound-care products and related intangibles are worth about $1 million.
"It is our intent to continue to manufacture and distribute these products and to convert the Kimberly-Clark branded products to the Derma brand name over the next 12 months," says Quilty.
Cleary & Oxford Associates, a health care investment banking firm based in Alexandria, Virginia, advised Derma Sciences on the deal.
On January 15 Integra announced that it paid $400,000 for Reconstructive Technologies, Inc., which has a tissue expansion device, and Integra expects to launch this product, the Automated Cyclic Expansion System, in 2005.
A division of Integra LifeSciences, JARIT Surgical Instruments, paid $2 million for a privately held medical device supplier in Cleveland, R&B Surgical Solutions. R&B is a three-year-old firm with an established customer base. It has more than 1,700 neurological and spinal surgery products and had about $1.2 million in revenue last year.
With about 250 employees on Enterprise Drive, Integra has 875 employees globally. It develops and markets medical devices particularly for neurological, spinal, plastic and reconstructive surgeries. JARIT was one of its purchases last year, along with patents from Neuron Therapeutics Inc., which has devices for treating central nervous system disorders. Also last year it acquired the assets of Tissue Technologies and J. Jamner Surgical Instruments.
Bloomberg reporters and editors who now work in Princeton Forrestal Center will be moving their offices to the company’s new building at 731 Lexington Avenue in Manhattan when construction is completed this year.
About 1,200 people work for Bloomberg in Princeton, but most of them are in the data collection and processing areas on Business Park Drive. The 160 employees in the Forrestal Center are in a total of 92,000 square feet at 400 and 650 College Road. Another 39,000 feet of warehouse and office space is located on Route 206.
Founded by Michael Bloomberg, mayor of New York, the firm offers on-line, real-time information, analytics, news and trading systems for all financial markets.
Ellen F. Affel is the new general manager of the Princeton office of Keller Williams, the nation’s sixth largest residential real estate firm.
A specialist in U.S. National Trust historic homes and a certified relocation counselor, Affel majored in English at St. Lawrence University. Before she joined this 80-agent office in 2001 she was with Weidel Realtors.
Gary Baughman, president of the Washington Group’s industrial process business unit, has hired Timothy Gelbar as senior vice president of biopharmaceuticals. Based at the Washington Group office at the Carnegie Center he will manage global pharmaceutical, biotechnology, and validation operations around the world. Helmet H. Steudel, also at this office, is vice president of business development, biopharmaceuticals.
"Tim and Helmut have the vision and experience to apply Washington Group’s resources to the requirements of an evolving biopharmaceutical industry that is faced with consolidation, pricing constraints, and time-to-market pressures," says Baughman.
Gelbar has a civil engineering degree from the University of Massachusetts, has worked at J.A. Jones Inc., Lockwood Greene, and created a pharmaceutical and biotechnology unit for Centrex Construction Group. Steudel is an engineer from Penn State who worked at Fluor Daniel, Process Facilities, and was vice president for strategic business planning at Parsons Corporation.
This is the headquarters of the power and biopharmaceutical units, and work is also done here on rail transit and highway projects, and contract maintenance for refineries and chemical plants. From 900 to 1,000 employees work here and at Carnegie 508.
Nick Riggi, 34, opened his second business, phone sales, last December, and has two employees. A native of East Windsor, he went to Notre Dame High School and obtained a hotel/restaurant degree from Middlesex County College. He carries these lines: AT&T, T-Mobile, Cingular, and Nextel. His first business was a delicatessen.
The trade association has moved from 510 Route 130, Royal Shopping Center, to Washington Boulevard in Robbinsville. It is a group of chemical and pharmaceutical manufacturers.
Bradley Dean Hardesty, 36, on January 13. He was employed by Medarex Inc. in Bloomsbury.
Patricia Scott-Buzzi, 54, on January 14, of Lou Gehrig’s Disease (ALS). She had been deputy surrogate for the Mercer County Surrogates Office.
Robert Alan Lacey, 44, on January 14. He had been finance manager at Perrine Buick-Pontiac-GMC in Cranbury.
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