Struggling Computer Firm Gets $5-Million Job for Pacific Bell
Until last week, Intelligent Communications Networks Inc., a struggling Westlake Village computer company, got all its revenue by running a computer network that helps junkyards locate used auto parts.
Then Incomnet, as the company is also known, landed a more substantial customer. It signed a two-year, $5-million contract to provide Pacific Bell with software and hardware for the phone company’s “internal use,” along with support services beyond.
That’s all either party will say about the equipment, which Pacific Bell wants to keep secret for competitive reasons. But the deal comes not a moment too soon for Incomnet. The company announced the deal Thursday, just a day after it reported that its first-quarter net loss rose 39% from the same period last year, despite a 50% revenue increase.
‘Truly Great Feeling’
“It’s truly a great feeling that finally the product and the company are authenticated by the right people,” said Charan S. Lohara, Incomnet’s chairman and president.
Incomnet lost $1.1 million on revenues of $368,000 in the quarter ended March 31, contrasted with losses of $789,000 on revenues of $245,000 in the first quarter of 1984. Bill Korn, the company’s finance director, attributed the losses to development costs associated with a new data communications computer, the Incomnet 3000, which has not yet gone into production.
The model 3000 has special software that would let virtually any computer plug into a given network, regardless of whether it is IBM, Kaypro or some other model.
“Now they’re ready to hit the marketplace,” said Thomas Berghage, research director at First Affiliated Securities, a San Diego-based brokerage. “One of the neat factors is, it will interface with any kind of computer. That’s what’s been needed.”
Computer networks--hardware, software and support services--are the specialty of Incomnet, a 10-year-old company that went public in 1981. So far, its only network--and only source of income--has been the junkyard system. That system links slightly more than 300 used auto parts dealers, as owners of junkyards prefer to be known, Incomnet says. The network helps them locate, say, a master cylinder for a 1969 Ford Galaxy.
Most Customers in California
Most of the dealers hooked into the network are in California, but about 40 are in Texas.
Incomnet says it regards the system as a prototype of what it hopes to establish for a wide range of businesses, such as executive search firms, that have similar needle-in-a-haystack problems, and a similar need to communicate.
“It’s great,” said Jeff Nesbitt, a part-owner of GM Only Auto Parts in Irwindale. “It’s the best thing since ice cream.”
Using the system, a dealer can issue a request for a given part to all members of the network simultaneously. Any member can then respond on the same computer. Members pay an initial installation fee of $200, plus a monthly fee that averages $350, depending on location, for unlimited use of the service.
“We use it just absolutely constantly,” Nesbitt said, adding that it brings in so much business “it requires just about one full-time employee to stand there and watch it.”
Biggest Network of Its Kind
“We probably buy and sell between 10 and 17 parts a day back and forth” on the network, said Jay Myers, general manager of Ace Auto and Truck Salvage in Chatsworth. “And I’m talking about big stuff--engines, transmissions, front ends.” Incomnet says its junkyard network is the biggest of its kind--for junkyards, anyway. But the junkyard trade is not nearly as important to Incomnet as the Pacific Bell deal, considering what the $5 million will do for revenues over the next two years.
For the year ending Dec. 31, 1984, the company had revenue of $1.5 million and lost $3.7 million. For 1983, revenue was the same, but losses were just $1.5 million. The company started losing money in 1982, when it began developing its new computer, Korn said. In 1981, revenue was $739,000, with earnings of $83,000.
That computer is the Incomnet 3000, which the company says is especially designed for networks such as the one used by the junkyards, and which Korn says is important for the company’s network plans.
The Pacific Bell deal, which the phone company confirmed but would not elaborate on, is Incomnet’s “first contract with anyone whose name is known by the general world,” Korn said.
Could Be a Strong Buy
Berghage said that “commercial-level orders,” such as the one from Pacific Bell, are just what Incomnet has been lacking and that if it lands some more, he will recommend it as a strong “buy” stock.
The company is based in Westlake Village, but half of its 100 employees are elsewhere, mostly in India, where it does a lot of its software development. There are also offices in various cities, including Sacramento and San Diego, for servicing the junkyard network, and more networks are planned.
