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Wireless Connectivity Systems Help Technology Firm Grow

February 2009
By Michael A. Robinson

A mid-size company blends needed electronics with acquisitions.

One could forgive Paul Domorski for running a little scared. How else can people describe an executive whose guiding business book is none other than Only the Paranoid Survive by former Intel Chairman Andy S. Grove?

That critically acclaimed book documents the impact that disruptive change can have on a company and its leaders. Grove’s case study about the power of what he calls strategic inflection points can be viewed as something of an oxymoron: It is a blueprint of sorts for managing unpredictable technological upheavals and the resulting chaos.

“The first thing is, you don’t like to be surprised,” explains Domorski, the president and chief executive officer of EMS Technologies, a fast-growing, acquisition-minded supplier of wireless connectivity solutions for the defense, aerospace and logistics markets. “If you are paranoid, you typically find there is more good news than bad news that occurs.

“You tend not to be surprised with new things in the market. If you go at it somewhat paranoid, I think you lead a better life. I have three kids who are college age. I tell them the things that cost you lives in video games are the same ones that get you in this world. You need to be cognizant of the things around you.”

Not that he is worried about EMS weathering the economic downturn amid tightening defense budgets. EMS operates antennas on Earth, Mars and near Saturn and has critical components on the B-2 bomber. The company reported a string of earnings increases under Domorski’s tenure and filled in the franchise with four acquisitions last year, one in each of the last four months.

Those acquisitions also are part of the company’s drive to downplay individual components and focus on integrated systems, a path it has been on for years. After all, defense accounts for about 30 percent of EMS sales, and the Pentagon is pushing for net-centric warfare, often described as a system of systems.

EMS also supplies antennas and data terminal components to the Defense Department. It also boasts an 80-percent market share of Inmarsat-based broadband connectivity for military and government VIP aircraft, the most famous of which is Air Force One. In addition, EMS expects to be a key player in the burgeoning market for in-flight broadband connectivity on commercial airlines, and it is working with Panasonic on a new system.

Nevertheless, the 52-year-old Domorski drives himself hard and keeps a close eye out for unexpected developments. A native of Red Bank, New Jersey, which often is described as an artistic riverfront community 10 minutes from the JerseyShore, Domorski knows firsthand just how traumatic unforeseen changes can be.

When Domorski was just nine years old, his father, who designed NASA space flight centers, passed away. His mother died five years later, leaving Domorski’s grandmother to raise him. Domorski found healthy outlets for his grief. Standing 6 feet, 4 inches tall as he grew up, he played basketball and dove into academics with a vengeance. He finished high school in three years and graduated from college at age 19. After his parents passed, Domorski says, “I was always wired into the next challenge.”

At that time, Domorski says, he was the youngest person to receive a bachelor’s degree from AmericanUniversity, where he received his master’s degree in public administration at age 21. He later picked up a master’s degree in organizational dynamics from the University of Pennsylvania.

“Graduating from college at an early age, if that’s all you do, that becomes irrelevant when you are 52 years old like I am,” he reflects. “You have to continue to exceed expectations and challenge yourself. Those challenges manifest themselves in business success.”

Indeed, since Domorski took the executive reins at EMS in June 2006, he has ridden the company to a string of achievements. In 2007, Forbes Magazine named EMS one of the top 200 small companies in the United States and also ran a flattering story about the company’s broadband equipment and sales success.

In 2007, the last full year for which statistics are available, EMS registered historic earnings of about $288 million, which represents an increase of $27 million, or about 10 percent. In the third quarter of 2008, revenues jumped 20 percent from the comparable period in 2007 to $87.8 million, and the company ended the year with a revenue run rate of about $350 million.

EMS celebrated its 40th year of operations in October 2008. The next month, the company announced it had acquired Satamatics Global Limited, a multinational provider of Inmarsat IsatM2M (machine-to-machine or “M2M”) services, headquartered in Tewkesbury, United Kingdom.

Acquiring Satamatics extended EMS’ satellite capabilities into the growing M2M market using low-cost satellite data terminals. The purchase also strengthened EMS as a market leader in satellite-based applications for tracking people and assets worldwide.

Three weeks later, EMS announced the $40 million purchase of Moorestown, New Jersey-based Formation Incorporated, a provider of airborne wireless network products that enable in-flight passenger communications with terrestrial and satellite networks. EMS stated it bought Formation to help meet the growing demand for aeronautical communications from airlines, business aircraft owners and government agencies.

Despite the torrid acquisition pace, EMS maintains a relatively clean balance sheet. For every $1 in shareholders’ equity, the company has only a nickel of debt. Since 2005, EMS registered a compound growth rate of 16 percent; if it keeps up that rate, it could double in size over the next five years.

“I would say that overall, we want to grow the company and create extraordinary results,” Domorski continues. “It’s part of my DNA and part of the company’s DNA. The company has always had great technology, talented people and attractive markets.

“What we’ve done is look at the markets we think we can win at and those we can’t and doubled down on those where we think we can win,” he explains. “We’ve had early success but see it as a long way to go to build something really special. We think we are on that path as evidenced by the numbers.

“We’ve had the ability to operate our technology at some of the fastest speeds in some of the most hostile environments,” he declares. “Everyone can do it standing still; we do it on three planets, we do it in remote search and rescue locations, we do it at 30,000 feet, we do it in Costco freezers, we do it on the B-2 bomber and the F-22 Raptor.”

Nearly 90 percent of defense-related sales stem from deals with such prime contractors as the Boeing Company, Raytheon Company, Lockheed Martin Corporation and Northrop Grumman Corporation. These customers rely on EMS to provide critical components and systems for radar, secure communications and electronic warfare.

At press time, EMS was expected to reveal another B-2 contract. In April 2008, EMS announced a B-2 award, one valued at $13 million, from Northrop Grumman. The contract covered the new extremely high frequency (EHF) satellite communications system for the U.S. Air Force’s stealth bomber.

Under a planned upgrade program, the new EHF system will allow the B-2 to send and receive battlefield information up to 100 times faster than its current ultrahigh frequency satellite communications system. The Air Force plans to retrofit all 20 B-2s flying today with the new EHF system.

The Navy plans to buy 500 MH-60R Seahawk helicopters designed for search and rescue. EMS’ antenna system will be in the nose and tail of each Sikorsky-built aircraft. Harris Corporation, the leader in battlefield radios, will use the EMS antennas to process video, radar, acoustic and sensor data for Seahawk terminals.

Meanwhile, EMS supplies antijamming hardware for Lockheed Martin’s next-generation military satellites. EMS also offers low-profile tactical and satellite communiations (SATCOM) radio frequency systems in the emerging net-centric warfare communications-on-the-move market.

Founded in 1968 in Norcross, Georgia, EMS pioneered the use of ferrite technology in space applications in the early 1970s. In 1976, EMS built the beam-forming network for the Defense Satellite Communications System (DSCS), representing the first electronically steerable antenna flown in space.

In 1999, EMS helped introduce live satellite television programming for U.S. air passengers when it installed an antenna system on the roof of a JetBlue Airbus A320. Today, EMS is working with Panasonic on the eXConnect system designed to provide two-way global broadband connectivity for a wide range of passenger and crew applications, including Internet access, voice data, television and real-time operational monitoring.

So, does that mean Domorski, who plays basketball at 6 a.m. twice a week when he is not on the road, finally will be able to put his feet on his desk and coast a bit? Don’t bet on it. He seems to scan the horizon constantly for signs of trouble—and opportunities.

“Our goal is to realize the value of the company and enable the company to achieve its potential in the market,” Domorski concludes. “We’ve been focused on the plan. We have a great team, and our job remains to continue the string of successes.

“If we do that, we will create a bigger company. You are only as good as your last quarter or your last year. Whatever then happens externally, you can look yourself in the eye and tell yourself you did the best job you could have.”

Web Resource
EMS Technologies:
www.ems-t.com/