SPECIAL REPORT

GROWING FROM A POWER BASE

With solid revenues from mobile energy units, Xantrex focuses on alternative sources

KEN MACQUEEN April 11 2005
SPECIAL REPORT

GROWING FROM A POWER BASE

With solid revenues from mobile energy units, Xantrex focuses on alternative sources

KEN MACQUEEN April 11 2005

GROWING FROM A POWER BASE

With solid revenues from mobile energy units, Xantrex focuses on alternative sources

SPECIAL REPORT

R&D

KEN MACQUEEN

“ARE WE THERE YET?” is a vexing question whether you’re driving a carload of antsy kids or guiding a company of cranky shareholders along the potholed path to profitability. It’s a question the Xantrex Powerpack was born to address.

Xantrex Technology Inc. of Burnaby, B.C., produces an ever-expanding line of these devices, about the size and price of a small boom box. The rechargeable packs work as an emergency power and light source,

At this B.C. firm, any idea that can’t be conceived, manufactured and profitably sold within two years doesn’t make it off the drawing board

jump-start cars, inflate tires, run power tools on the back forty, power blenders full of campsite margaritas or calm impatient children with backseat television or video games. Portable power products are a growing part of Xantrex’s operations, accounting for close to a quarter of its $173 million in revenues last year. And, yes, company chairman Mossadiq Umedaly can tell shareholders, Xantrex is there yet. “We turned profitable in 2003, and we were profitable every quarter last year.”

A challenge for any technology company is setting the level of revenues to reinvest in the research and development of new products. Umedaly, a veteran administrator

and chartered accountant, has a refreshingly impatient view, born of painful experience. For eight years, he worked as vice-president and chief financial officer for Burnaby-based Ballard Power Systems. He helped raise hundreds of millions for zeroemission fuel cell research, development and commercialization, but Ballard remains years away from profitability or its vision of massproduced cell-powered vehicles. “It’s a company with a great future,” he says

of Ballard. “The question is, when does that happen?”

It was Ballard’s need for quality power electronics that first fostered Umedaly’s interest in Xantrex. A neighbouring company founded in 1983, it had a solid technological base, modest revenues, and decidedly less lofty goals than Ballard’s plan to transform the automotive world. “I could see the potential here immediately,” says Umedaly, who signed on with Xantrex in 1999. He set about building an industry leader by acquiring power conversion companies that fit its strategy for growth, and by radically expanding its product reach.

Xantrex isn’t intent on hitting the home run that Ballard keeps swing-

ing for. Still, its market-focused ideas can be novel, even revolutionary. Many Xantrex products are variations on a theme: they refine raw power—whether from batteries, wind, water or solar generation—and convert it into stable sources of household or industrial current. That can mean running a television at a remote campsite (perhaps not a great social achievement) or providing ultra-stable power sources for uses as diverse as the international space station, instrument testing, medical needs or semiconductor manufacturing.

About 10 per cent of revenues are poured into applied research. Engineering Department head Nazir Mulji, one of the original company founders, says research serves the company’s entrepreneurial focus, modifying existing technologies to meet market needs. “There’s more ideas than we can deal with,” he says. “We’ll never run out.” Umedaly defines the company culture as “a passion for solutions, not a passion for technology. People who have a passion for technology for its sake will not find this a happy place.” Nor are they encouraged to dawdle over their workbenches. Any idea that can’t be conceived, manufactured and profitably sold within two years doesn’t make it off the drawing board. “We want to make money on the product from day one,” Umedaly

The PowerPack 400R works as an emergency power and light source, jumpstarts cars, inflates tires, runs tools, or powers hand-held blenders full of campsite margaritas

says. “Maybe we start with a slightly lower margin because you’ve got teething issues with a new product— for a quarter or two,” he says. “I can tell you, if they last beyond a quarter or two, somebody’s dead.”

Xantrex also plays a central role in green energy markets. Last October, it introduced a home system in the U.S. that harvests and processes energy from solar panels and feeds it

into the power grid. Umedaly believes the world’s electrical grids will increasingly be powered by a web of non-traditional sources: millions of home rooftops, wind and solar farms. “We’re going to have an Internet of electricity,” he says. “It’s already happening and we’re a great contributor to that.” So Xantrex is also developing next-generation power drives for wind turbines.

Both products are more viable because of American incentives for alternative energy production, a tactic Canadian governments have been slow to adopt. “We rate one of the lowest in the world for incentives for renewable energy,” Umedaly says, “but you’re going to see this change.” His vision has yet to fully appear— he’s not there yet—but the journey is proving profitable. iifl