Cell-Loc finalizes manufacturing contract; gives company lead time to land deals

Calgary-based Cell-Loc Inc. has secured a manufacturing agreement for its wireless location beacons by finalizing a deal with a Brazilian embedded electronic modules designer and manufacturer. PST Industria Eletronica de Amazonia Ltda. has agreed to produce the company’s Cellocate Beacon device, and will also participate in future development, production, and application of the Beacon technology. Commercial launch Cell-Loc’s Cellocate Beacon II product is expected to take place this summer, according to company executives. With this latest agreement, Cell-Loc has now locked up manufacturing not only for its Cellocate Beacon products, but also for its network gear – something the company needs to do before it can launch a major market push. "The one thing we wanted to do prior to making commitments in the marketplace to deploy our networks was to get a solid cost model built, so that we knew how profitable our revenue was going to look," Sheldon Reid, Cell-Loc’s executive VP corporate and business development, tells Report on Wireless. "So we’ve positioned ourselves now as we look at various buildouts, we know basically, relative to the revenue model, (what) a city for sample will offer." This is all a result of the company’s restructuring efforts undertaken last year, as it grappled with high operating costs and a lack of investment capital. The company also had to put on hold its plans to build a national wireless location network (RoW, March 19/01). Cell-Loc needed to take a pragmatic approach as it weathered the downturn in the economy. "We know where the cost sits and it makes all of our efforts very calculated," Reid explains. While the company has slashed its research and development dramatically over the past year, Cell-Loc is still banking on future iterations of its products to drive revenue (RoW, May 28/01). In its second-quarter results for this fiscal year, Cell-Loc reported R&D expenses of $666,000. That’s a marginal increase over the previous quarter’s level of $620,000, but a dramatic decrease over levels recorded in previous years. For example, R&D costs for Q2 2000 were $1.6 million. Keeping expenses in check has been one of the keys for Cell-Loc to survive the general economic downturn and a retrenchement of capital markets. Future product development key Migrating its Cellocate Beacon products down to the chip level also represents a substantial opportunity for Cell-Loc. The company is shooting for mid-2003 for the release of its chip-level Beacon product, which will enable Cell-Loc to do everything from asset tracking right down to notebook tracking, Reid says. Moving to a chip-based product is really about targeting the tracking, monitoring, and messaging markets, Reid explains, adding that these aren’t emerging markets. While he admits that a chip-level system would allow the company to go after the cell phone location market, the company isn’t planning on going in that direction. "More importantly for us, is that the value equation for messaging, monitoring and tracking is much, much larger to us than looking at services through cell phones," he says. "At least the way we’ve painted the landscape, it’s not worth our effort to spend any resources or time in that direction." While neither the markets nor the economy have been kind to Cell-Loc in the recent past, Reid believes that everything has now fallen into place. Discussions for network expansion are progressing well and the company is currently searching for the right strategic partners to offer the services. "I think there’s some serendipity here, and I think we’re taking off from the technology side of things at the same time as the economy is improving," Reid says.

Cell-Loc finalizes manufacturing contract; gives company lead time to land deals

News | 03/18/2002 5:00 am EST

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