A sound strategy may spur turnaround Noise Cancellation eyes consumer market

September 29, 1996|By Mark Guidera | Mark Guidera,SUN STAFF

Daily life. It's full of, well, noise.

It is that simple but sometimes annoying fact that Michael J. Parrella is banking on to save his company, Noise Cancellation Technology, from extinction.

The amiable father of three figures he's got two years to bring the Linthicum-based company back from the financial brink.

The publicly held firm hasn't posted an annual profit since it went public in 1983. And it recently reported a $76 million deficit as of June 30.

As for its stock, it's in the tank. Shares in NCT closed at XX cents Friday. For the year, the stock has lost more than XX percent of its value.

To stay afloat for the next year, the board of directors and Parrella convinced the company's chief investor, New York-based Kingdon Associates, to give it a private cash infusion of almost $5 million this year. Now the company is at a critical juncture as Parrella, the company's president, aims to get it onto solid financial ground.

Two years ago, Parrella and a new board of directors charted a plan to shift the company's focus away from strictly developing and selling noise and vibration reduction equipment to the industrial sector. That had turned out to be a tough market to crack because of the high cost of the technology, and the fact government noise regulations don't make it an absolute necessity.

The new strategy uses the company's technical expertise in noise reduction and sound to develop and market products for more consumer-oriented markets, such as phones and audio-equipment.

"Without a new strategy, this company would be out of business today," Parrella said.

While the company hasn't completely ditched its efforts to market devices and technology to industry, Parrella estimates that market will take at least another 5 to 10 years to develop. Its maturing is heavily hinged to stricter industrial noise regulations here and abroad.

"We needed to produce a line of products that were for today," he said.

"Let's face it, if you don't have cash today, there's not much point worrying about what you can offer in the future," said Parrella, 49, who paints himself as a once roving savior to troubled companies who has found a place he wants to roost for the long term.

Next month, the first of a new line of consumer-oriented products that Noise Cancellation plans to release will hit the market. And with it, the company hopes, will come badly needed cash to keep the struggling company afloat.

The device, dubbed the ClearSpeech-mic, eliminates static and other bothersome background, or "ambient" noises that sometimes impinge on the clarity of cellular phone and other telecommunications, like phone calls, music and other sounds piped over the Internet.

The technology to do this -- called active wave management in the industry -- involves a computer chip that recognizes voices and other sounds as "good" waves or noise.

The chip allows these sounds to continue down the communication channel, while at the same time recognizing ambient, or "bad" noises and zapping them with electronically produced sound waves that cancel them out.

New advances

Noise Cancellation's engineers and electronic wizards have used this technology and new advances in managing sound waves to create an array of other nifty consumer-oriented products to eliminate sound interferences and improve sound quality.

These range from hi-fidelity audio speakers that are flat and can be hidden in picture frames and car roofs to a micro-chip that eliminates the ubiquitous static present on many AM radio frequencies.

"This is a gamble, but it's a gamble I'd bet our side of the fence on now," said Parrella of the new strategy.

That gamble, of course, includes the fact that there are competitors, albeit just a few, in the noise reduction business who have also noticed that the technology may have considerable applications for consumer-oriented products.

Competitors include 60-year-old Andrea Electronics Corp. of Long Island City, N.Y., which counts among its customers U.S. defense and national security customers, one of the few commercial sectors that has been willing to pay a high price to ensure submarine commanders and others have clear voice communications over radio and other channels.

Andrea Electronics, however, also has begun targeting the consumer-oriented market, namely computers and phones.

But, as Parrella sees it, the key challenge facing his company today isn't competitors or new technology.

It's convincing major computer, phone and audio equipment manufacturers that including the company's noise reduction and sound enhancement devices in their products will be a feature that can help drum up market share.

The other challenge Parrella has the company focused on meeting is timely shipments of products to customers each quarter.

Meeting those goals, Parrella said, will generate the cash, and build the company's brand name recognition and reliability.

"It won't be easy, but we've got the goods now," said Parrella.

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