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PR in Service to Building the Company

Mory Ejabat, Founder and CEO, Zhone Technologies, Inc.

When I joined Ascend Communications as vice president of operations in 1990, took the company public in 1994, and sold it to Lucent Technologies in 1998 for $24 billion, public relations (PR) was not at the top of my list of concerns.

Nor is it at the top of my list of concerns for Zhone Technologies, Inc., the telecommunications equipment company I founded in September 1999 with $500 million in first-round venture capital.

What propelled Ascend to the top—and I believe will do the same for Zhone—was unremitting focus on building a company with a unique product tailored to a well-defined customer.

Ascend was founded in 1989, developed the architecture for Internet-based communications that enabled high-speed networking connections, and became the leading maker of digital switches and networking products for wide-area networks. The company grew 30 to 40 percent annually, and by the time it sold had more than 3,000 full-time employees and nearly $2.3 billion in sales.

Ascend was in its second of four rounds of venture capital raising when I came on board, and for most of those early years—from a public relations standpoint—its biggest challenge was educating analysts, investors, and media about the Internet. It's hard now to imagine that until the late 1980s Internet technology was primarily a tool used by the military to protect its computer networks and large universities to transmit data and educational resources.

Preaching the Internet

Thus, when Ascend launched its first line of multi-media access products in 1991 and unveiled a wide-area network access switch in 1992, our PR efforts might best be described as preaching the Internet. We called it the "yellow pages of the future" and emphasized its value as a vehicle to communicate.

Rather than paid advertising, we focused on building relationships with industry analysts, reporters, and investors. By becoming their teachers, we helped them do their job. By raising their level of understanding of the Internet, they in turn educated potential customers and the public about the Internet and our products. We sent them press releases, called them on the phone, visited them in their offices, and invited them to visit us. Some of the work was outsourced to agencies but most was handled in-house.

The environment for technology companies was very different when I sold Ascend and launched Zhone. By the late 1990s, the tech boom was in full swing and the Internet a household word. As CEO of Ascend, a company that led the industry, I didn't need to solicit press coverage. The press came looking for me, which is not to suggest what they ended up saying or publishing was always favorable.

I took a lot of heat from the media in 1997 when Ascend's stock dropped in the aftermath of purchasing Cascade Communications, a top maker of wide-area network switches, for $3.7 billion. Analysts couldn't make up their minds about what it meant for Ascend. Lucent, on the other hand, saw a unique opportunity for an acquisition that would improve its ability to compete in the data and voice transmission market and took it.

Now, I read everything to see what's being said about the companies I lead but take none of it personally. For big public companies, media scrutiny comes with the territory. You can't control it. The irony is that it was Ascend's product that became the de facto standard for offering the Internet services that have enabled so much of that scrutiny to reach so many people.

Building a Track Record

When you're number one or two in your industry, the press comes to you. When you're not, my philosophy is you don't ignore PR but you don't spend a lot of time worrying about it.

The fact that Zhone cofounder Jeannette Symons and I were able to raise a record amount of venture capital in the first round, I believe, had very little to do with PR and everything to do with the track record of Ascend.

Zhone went public in 2003. Revenue for the third quarter of 2006 was $43.1 million compared with $54.2 million for the second quarter of 2006 and $40.6 million for the third quarter of 2005.

While the decline in third quarter revenues was disappointing, we expect to rebound over the next few quarters as seasonal issues in our international market return to normal and buying patters of our largest customers resolve themselves. As explained in our press release announcing third quarter results: "Zhone believes its products are interoperable with more VOIP softswitch platforms and protocols than those of any other access equipment provider in the industry."

Zhone has a way to go to become number one or number two, so as far as PR is concerned, we're laying pretty low-building relationships, telling people who we are, and what we're doing.

I'm thinking next year we'll put a PR plan together. In the meantime, like Ascend, Zhone has a unique product and acquisition strategy. And, like Ascend, the focus is on building the company.

© 2007 Ewing Marion Kauffman Foundation. All rights reserved.

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