- The Washington Times - Monday, January 14, 2002

American bombs are dropping in Afghan-istan, European economies are shrinking and Japan is fighting off 10 years of stagnation.
Still, Ciena is gambling that the global economy will pay off.
Mike McCarthy, Ciena's senior vice president for worldwide sales and support, says the manufacturer of optical networking equipment is shooting for "prudent, business-oriented growth." Ciena's days of opening offices pell-mell it already has 45 worldwide are over, he says.
Overseas sales accounted for 24 percent of the Linthicum, Md., company's total sales of $1.6 billion last year. Still, Mr. McCarthy is taking a conservative approach to foreign expansion, working existing markets thoroughly and extending its reach only when a payoff is within sight.
Ciena is staying out of markets like Russia, Africa and the Middle East, which seem more hype than reality. But even as it laid off 10 percent of its work force, mainly in Maryland, it added people in Europe and expanded into Spain, a country that is modernizing its telecommunications infrastructure.
"We're not opening a Moscow office just so we can check off a box on our chart," Mr. McCarthy says, shortly before a trip to drum up business in Europe.
The recession that began in March and the war on terrorism that began after the September 11 attacks have hardly stopped globalization, one of the intoxicating economic forces of the 1990s. But the dual shocks of 2001 have prompted area businesses to invest much more thought and less money overseas.
Even with the American economy bottoming out, and a recovery likely in mid to late 2002, the watchword is prudence, in contrast to even a year ago, when exuberance ruled.
Instead of running headlong around the world, Washington-area companies are surveying the terrain, calculating what risks they can afford to take, and moving cautiously if they move at all. Last year was a time for rolling back operations, solidifying existing ones, or putting off plans for expansion altogether.
The urge to go international took on a faddish feel over the last few years, says Jim LeBlanc, an Arlington-based consultant and board member of the Northern Virginia Technology Council who works on international issues.
"The companies that thought they 'got it' and threw open an office overseas closed up right away when times got tough," he says.
Peter Barris, a managing general partner at New Enterprise Associates in Reston, advises new companies to maintain a strong focus on the United States and patiently mold their international strategy to their own capabilities and to market demand. The days of every company being a global company are over, and rightly so, says the experienced venture capitalist.
"It's not a departure from the norm we're experiencing now," Mr. Barris says. "It's a return to the norm."
NVTC's International Committee, which serves as a networking forum for overseas-minded companies, has seen a steep drop-off in attendance at its monthly meetings.
Though still the largest NVTC committee, many now come to its gatherings not to do deals, but to find jobs.
Also, fewer companies are joining state-sponsored trade missions. In recent years, the Virginia Economic Development Partnership took up to 20 companies to Cebit, the world's largest information technology exhibition, in Hanover, Germany. The contingent this year could be as small as five, according to a person familiar with the situation.

Rapid expansion
Even before it went public in 1997, Ciena got the global bug. It now has offices in cities including Rio de Janeiro, Seoul and Brussels. Revenues flowing in from overseas accounted for less than 2 percent of the company's sales in 1997. But that figure ballooned to 23 percent in 1998 and 44 percent in 1999 before dipping during the last two years.
With the U.S. market largely saturated, international expansion remains a question of how, not if, Mr. McCarthy says. With soft markets in the United States and Europe, Ciena is hopeful that Asia will deliver some results.
"I think you'll see overseas revenues grow in 2002 over 2001," Mr. McCarthy says. "The international market will be stronger this year, with that growth showing more in the second half of the year, and even stronger in 2003, once the economic recovery kicks in."
Jack McDonnell, chairman and CEO of Transaction Network Services, is hoping to cash in on foreign markets as well. Still, last year he took a chainsaw to his company's international operations, the remnants of boom-era exuberance left behind by now-bankrupt PSINet.

Scaling back
PSINet, of Ashburn, Va., in 1999 acquired TNS, which processes data from credit-card transactions for large financial institutions. But financial troubles early last year forced PSINet to sell TNS back to Mr. McDonnell, the company's founder.
PSINet had taken TNS into 29 countries during 2000 even though it had won few new clients. When he returned, Mr. McDonnell put the kibosh on 28 of those ventures.
"You don't do a major rollout in any country unless you sign a customer," Mr. McDonnell says. "That's a cardinal rule."
TNS remains successful in the foreign markets where it maintains offices: Britain, Australia, Spain, Ireland and France.
Despite pressure from his own clients, Mr. McDonnell resists growth for the sake of growth. He has visited Brazil a half-dozen times, partly at the behest of American Express, which wants access to TNS services there. But TNS relies on the existing telecommunications infrastructure, which is pretty poor outside the city of Sao Paulo, Mr. McDonnell says. For now, TNS will wait.
Aether Systems' plans for Europe seemed perfect a year ago. The Owings Mills, Md., wireless products and services company looked like a perfect fit for a continent that has many more cell phone users per capita than the United States.
In June 2000, Aether started a joint venture, Sila Communications, with British media giant Reuters to provide financial data to customers via wireless devices. Aether and Reuters also acquired two companies already in the business, which became the core of Sila itself.
Aether sunk about $80 million into the venture, according to Aether's director of investor relations, Gregg Lampf.
The company hoped for a quick payout in the form of an initial public offering for Sila, which was slated to become "the Aether of Europe," he says. The IPO never happened.
"In the heyday of wireless, that was on our plate," Mr. Lampf says. "But the markets haven't provided the opportunity."
Now, Aether is trying to reorganize, focusing on its core business of wireless software products. Though it maintains offices in London and Mexico City, and a minority joint venture in Korea, it remains fundamentally an American company.

Tighter focus
Unlike Aether, hard times forced mPortal, of Vienna, deeper into the embrace of its overseas customers.
With a weak American market, mPortal drew a bead on Europe, according to CEO D.P. Venkatesh. The company, which develops software linking wireless devices to corporate computer systems, seemed poised to cash in as the technology caught on in the United States.
It soon faced a flat home market, as companies chose not to spend money on wireless technologies. The company still opened an office in London last June, betting its future on a more mature wireless market.
The gamble appears to have paid off. By the beginning of the year, mPortal's business began to tilt hard in the direction of Europe, which now accounts for about 40 percent of its sales. Mr. Venkatesh says the trend will continue.
Still, mPortal plans to mine the potential of its London outpost before venturing across the English Channel.
"Running an operation in five countries is not only expensive, it's a nightmare," Mr. Venkatesh says.
Artesia Technologies of Rockville also had to shift gears. It still plans to become an international company, though more slowly.
Artesia already had an office in London to peddle its software for managing digital video, audio and text content when the U.S. downturn hit last year. The firm had entered Britain in the fall of 2000.
"Like every other software company, we wanted to plant our flag in Europe," says President and Chief Operating Officer Scott Bowen.
By the second quarter of last year, 20 percent of the 3-year-old start-up's sales were in Europe. High on success, Artesia prepared to open locations in France and Germany just as its customers began slashing their budgets.
Those plans are now on ice. Instead, Artesia is working its European customer base from London, saving money on the offices it did not open, and thinking positive about the future.
"By this time next year, we'll be in Asia," Mr. Bowen said. "But we'll be cautious and prudent."
HireStrategy, an area executive-recruiting firm, never made it over the ocean last year.
The Arlington company was founded in January 2000 and grew from four to 25 persons in its first year. With its focus on technology, HireStrategy smelled an opportunity to bring European managers to the Washington area and planned for outposts in Britain and Ireland, says Director of Corporate Communications Stephen Johnson.
By mid-2001 it had shelved those plans. Now, HireStrategy has its eyes firmly on the domestic market as companies begin searching for new talent that they can put on the payroll in the spring.
"The first thing we need is a recovery in the United States," Mr. Johnson says. "We'll go international in 2004 at the earliest."

Staying put
Blue Ridge Networks of Chantilly, like HireStrategy, plans no expansion but is still chasing overseas revenue from its perch in the United States.
It builds and operates "virtual private networks" to link up a company's disparate sites. In the last 18 months, Blue Ridge has seen a strong "internationalization" of its clientele, so that about 30 percent of its customers now have overseas operations, says Tom Gelbert, its vice president for security technology.
Blue Ridge's own strategy involves finding partners in Europe who can sell and service its technology to clients, says Mr. Gelbert, who hit the road to Zurich last week to beef up the company's relationship with a Swiss technology security firm.
Since it is not a high-volume operation, Blue Ridge does not need a direct sales presence, he says.
"At this time, we don't see a need to open offices overseas," Mr. Gelbert says. "We can do what we need to do from Northern Virginia."
Sentiments like Mr. Gelbert's might please cost-conscious managers, but they squeeze the business of consultants who help in making the leap overseas. Patrick Dine, a consultant with EndeavorConnect in McLean, says many younger firms now see global operations as "an extra they can't afford."
"You have to really convince people to go international now and not wait six months," Mr. Dine says. "A year ago, it was less a question of if, than how."

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