NF: What prompted you to make the move to RFM in 2008, when you joined as VP of Marketing?
FH: After NovAtel, Inc. sold to Hexagon AB, I wanted to move my family back to the States from Canada. I looked for an opportunity similar to the situation that took me to NovAtel in 2002a public company with great core technology, diversified markets, and customers, along with target markets with lots of upside. As it turns out, RFM was the standout among the possible opportunities. Here was a well-established, 30-year-old company with an unusual depth of RF technology that spanned original-equipment-manufacturer (OEM) components, subassembly, and fully certified module products. What was particularly appealing to me was not only the diversified markets into which RFM sold, but also how effective it was at taking a rifle-shot approach into key subsegments within the automotive, industrial, medical, and telecom markets.
NF: RF Monolithics has been through a lot of ups and downs for the last five or so years. I recall that the firm was hard-hit during the economic crisis, just about the time you joined the company.
FH: Like most companies, we were definitely hard-hit. RFM had a pretty deep concentration in the automotive space prior to the 2008 economic crisis. In a matter of about three to six months, RFM's quarterly revenue dropped about 40%primarily because of the auto industry and some other core vertical markets, which were impacted at the onset of the 2008 downturn. This trend bottomed out for two quarters, but we steadily recovered in the ensuing quarters. While we are still below our 2008 fiscal-year revenue, RFM is back to profitability and churning out some high-demand products. Fortunately, we have maintained our presence in the auto industry. And in some instances, we have visibility for potentially deepening our presence in some core vertical markets, such as consumer and telecom.
NF: What helped RFM get back on its feet?
FH: One of the things about RFM as a company is that it has never been entirely knocked off of its feet. In the 30-plus years of the company's history, RFM has maintained a rather austere financial-management style, which has sustained it through tough economic times. To be sure, we took a few punches during the 2008-to-2009 downturn. But management took very quick action to right-size the business for the revenue trends we were seeing. We became even more focused on our machine-to-machine (M2M) strategy and the key technology and target markets within that plan. Plus, we had a considerable number of design wins in the medical market prior to the downturn, which was our only vertical market where we increased revenue in late-fiscal-year 2008 and 2009. As a result, we have an even broader footprint in the healthcare/medical market today than ever before.
NF: Have those changes made it a different company than before these economic trials?
FH: The biggest change in the company was our exit from the computerized-maintenance-management-system (CMMS) and facility-management software business. We are still engaged with and targeting the M2M space, but now our focus is purely in the hardware-solutions area. Our business focus is in creating products that enable design engineers to implement wireless connectivity into their productswhether they want to make their own RF circuit or bypass the RF engineering process and buy a certified RF module. Even though we are organizationally a flatter company than we were before the downturn, we have some of the best RF engineering and product-development people in the world still on board, like RFM Founder Darrell Ash (see photo).
NF: Now that the company is enjoying a greater sense of stability, what are your plans for growth? Which markets are you targeting? And where do you see the most opportunity?
FH: Even during the downturn, RFM maintained its focus on our M2M strategy. Then, just over 12 months ago, we kicked off a three-pronged growth strategy. In the frequency-control area, we are rapidly developing products to meet anticipated demand in some key high-volume, high-growth niche markets. Secondly, we are investing to rapidly expand our M2M product portfolioparticularly in standards-based products including sensor modems and gateways to go along with our module line. Lastly, we are expanding awareness of our modules portfolio. The key verticals we're focused on vary by product group. But in general, our modules are focused on M2M applications primarily in the industrial and medical markets. Our component products target GNSS, medical, and industrial markets, while our subassembly radios are focused toward medical, industrial, and homeland-security markets. M2M applications in a number of these markets appear to have great growth opportunities moving forward. Given that our routine sales cycle is 12 to 18 months, RFM is just starting to see new revenue from these efforts. An additional growth driver is our collaboration with MuRata, which we believe holds promising opportunities.
NF: In the April edition of this column, we interviewed David Kirk, who left the helm of RFM to become the new CEO of MuRata. What will be the hardest thing about taking the reins from David?
FH: David was a great leader for RFM for a number of years. RFM's board had a clear succession plan in place, so I was fortunate to be mentored by David for my new leadership role for a time prior to his departure. I suppose the hardest thing is the lack of his day-to-day input and feedback. We do have the majority of the leadership team in place who were there under Davidmany having been with RFM for 10 or more years. I have confidence in them and their abilities to lead RFM with me going forward. They understand this industry and the engineering customers we serve, and I admire how seamless they have made this leadership transition for all of RFM's staff.
NF: And RFM will still have a close relationship with Kirk, given its collaboration with MuRata?
FH: Last July, MuRata and RFM signed a collaboration agreement in which we identified a number of areas where our two companies could look at working together. These areas, once discussed and refined, become projects under the initial collaboration agreement. In early February 2011, we signed the first project. In April, RFM announced the first products out of that collaborationthe Wi-Fi and Wi-Fi + Bluetooth combination modules followed by the ZigBee Pro certified modules in May. We are currently exploring additional areas for collaboration. Additionally, MuRata made an investment of approximately $700,000 in RFM for just under 5% ownership. With David at the helm of MuRata North America, he and MuRata have that connection to RFM.
NF: Are there any other partnerships you're looking at?
FH: There are other potential alliances that we're examining. But for a company of our size, we are careful to make sure we leverage our scarce resources, but don't overextend them. For instance, in the M2M space, RFM could work with middleware and application providers to expand sales and business-development coverage. This should be a win-win and allow broader exposure for both RFM and potential alliance companies. Building meaningful alliances is a must for RFM to truly maximize its potential.