At PacStar, Tactical Thinking Calibrates Growth Trajectory

Portland, Ore. – When the PacStar board of directors decided to restructure the technology systems firm in 2010, it rehired Bob Dunn, its former senior vice president of sales and marketing and named him CEO.

Dunn says the firm had reached a revenue point “where $50 million was commonplace,” but growth was limited. So he used that revenue base as “the launching pad that would send us into some significant growth areas” by securing a substantial foothold in the public sector, namely as a provider of military communications equipment.

“Without getting too technical, we shifted from a tactical and enterprise company to primarily a tactical company,” Dunn says. The enterprise piece of the company – reselling big systems and switches – was shelved indefinitely. PacStar would focus on creating advanced communications equipment for the Defense Department and developing software to take advantage of its communications technology and products.

Since shifting to proprietary tactical communications, PacStar revenues have increased more than three-fold during the past three to four years. “We’re seeing overall revenues and EBITDA continue to grow beyond established targets, and we anticipate this product portfolio shift to translate into strong revenue growth going forward in the near term,” he says.

“We’re shooting for somewhere between $70 million and $100 million plus depending on the customer and the category. How long it takes us to get there will depend on the customers’ definitions of the solutions,” Dunn says, “and then ultimately getting to a point where we grow methodically but remain surgical in our cost structure.”

Dunn’s says the first task upon his return was to recalibrate PacStar’s strategy, focus on its strengths, and then make sure there were no deviations from that new strategy. “We sat down in a room and white-boarded a lot of ideas, made sure that the numbers we were shooting for were realistic and achievable because the board entrusted us to change the game,” he explains.

PacStar met its new first-year targets. “From there we knew that two key events had to happen to continue our success and claim victory, if you will,” he says. First, PacStar needed to focus on the sale of tactical communications. “We wanted a big win with a big customer,” Dunn says. That turned out to be an $11 million contract for tactical communications gear for U.S. Forces Afghanistan, PacStar’s largest sale up to that time.

That provided the funding to add new engineering talent and to prepare for the next major event – the development and sale of PacStar’s proprietary IQ Core software.

“Without really seeing that target [clearly] we took a bit of a chance and said, ‘You know what? Our IQ Core software is mature, it’s robust, it’s ready for prime time. Let’s start positioning this and get this tool in the hands of several users so that ultimately a big program will take advantage of this and see the value [of it],” Dunn explains.

The IQ Core software “has become the tool of choice for what is called nodal management in tactical communications,” Dunn says, defining “nodal” as a basic element in modern communications technology, “anything from a card to a kit to an application.” IQ Core is now part of the Army’s $10 billion global information network of voice, video and data services known as Warfighter Information Network/Tactical (WIN-T).

Although PacStar’s slice of the nodal market is still relatively small, “the opportunity before us is tremendous,” he says. “We’ve just started to put this tool in the hands of the users and by word of mouth and by proving the value through the application, IQ Core software will become better known as we continue.”

Meanwhile, PacStar continues to sell its communications kits. Last month the private Oregon company won a six-month, $8.4 million contract to supply the Marines with PacStar’s 4100 kits, a rapid-deployment portable package for sharing voice, video and data over secure and unsecured networks.