Good chemistries encouraged a quick deal

Sir Terence Matthews knows all about protocol.

After all, the chairman of Vancouver-based CounterPath Solutions Inc. is a British knight of the realm. But the protocol that he prefers is the one that relates to the Internet.

"I wasn't sure whether I should be knighted, because titles are not that important to me," he says.

Matthews, who moved to Canada in 1968, has held many titles during a tech tenure that began when he was in his teens in his native Wales. And he is a corporate knight in shining armour to fledgling technology firms such as CounterPath, one of 60-70 tech companies that Matthews has taken to new heights since he founded Mitel Corp. in the early 1970s.

Wayne Chose, Business Edge
CounterPath Solutions Inc. chairman Sir Terence Matthews has made a career out of taking tech firms to new heights.

CounterPath reported a 24-per-cent increase in revenue over the last fiscal year and ranked 13th amongst Canada's top 20 small and medium-sized enterprises in a 2006 survey conducted by the Queen's School of Business and Queen's Centre for Business Venturing.

Matthews' holding company, Wesley Clover, has become the majority shareholder of CounterPath through a deal that saw the Vancouver firm merge with Victoria-based NewHeights Software Corp. He has injected about $6 million into CounterPath.

He comes across as being very casual as he shakes one's hand, introduces himself simply as Terry Matthews, flings his suit jacket and mugs glibly for a photographer.

But one is still expected to follow a certain protocol when interviewing him as he briefly takes time out between appointments.

"I like business profiles - not personal profiles," he says. "So some of your 20 questions I just won't answer."

But we still managed to pry 20 responses out of him.

1. How did you become a knight?

"I was chosen by the government to see the Queen and have a knighthood because of the things I've done in the world of communications in the United Kingdom. That typically relates to starting up Mitel Corp. and then getting involved with (more than) 60 other companies - all in the communications industry - in particular with the United Kingdom, introducing all kinds of equipment, features, functions and services that were under my domain. (Knighthood) doesn't come for nothing - and then there's a pecking order, you see. I am a Knight of the Realm. (Knighthoods are bestowed) in different streams. In my case, it's on the industrial side. (A Knight of the Realm ranks) very high. People will typically aspire to that. There's only one higher level with the Crown and that's the Knight Commander."

2. Take us through the ceremony when you were knighted.

"It's typically with the Queen, with the sword on the shoulder and so on. This is a well-known kind of procedure for Knights of the Realm at Buckingham Palace. When I was knighted, so was (Sir Louis) Gerstner, the (former) IBM CEO."

Sir Terence Matthews

3. When did you find out you were going to be a knight?

"About six months before the ceremony."

4. What are some of your knightly responsibilities?

"Only opportunities that I wouldn't otherwise do. Not responsibilities, but opportunities. As an example, anyone in my family can be married at St. Paul's Cathedral. The little things. Perhaps some people would like that. As far as I'm concerned, it doesn't matter very much. I don't consider titles as being that big a deal."

5. Are there any gatherings or public functions that you attend?

"There are, but there are no obligations."

6. How did you get involved with technology?

"I was born in the United Kingdom. In my background, I was chosen in school to be an apprentice in what was then the British post office, in the research department. Today, it's called British Telecom and I was on the R&D side. When I was young, at the age of 15, they selected me in school to be an apprentice. I took an honours degree in electronics and (another degree) in mechanical engineering. So I have a pretty strong educational background. In my career, I have started up over 70 companies and only three have been lost. The probability of success is quite high, because I'm a very persistent person and the companies I start up are always in my area of expertise in the communications sector. The first company I started up was Mitel.

I started that company up with only a $4,000 investment. As you know, that was in 1972. It's a long time. The company's continuing to grow well."

7. How did you end up moving to Canada?

"I came for a holiday. It's been one long holiday."

8. Can you tell us a little bit about your family?

"Oh, no, I don't talk about my family. Business, I'll talk about. Family, I don't. If you want to talk about business, I'll talk all day."

9. What gave you the idea for Mitel?

"The company started with touchtone receivers that at the time were $1,500 each and were a considerable impediment to the growth of digital phones. At Mitel, we developed tone receivers that we could sell for $150 each and even at that price, there was 80-per-cent gross profit. The company first went public in 1979 on the Toronto Stock Exchange. It was the first-ever company to make a software-driven microprocessor called PDX. In five years, from '78 to '82, the company grew from no market share to about 70 per cent of the planet, from no countries to 90 countries. The valuation, the share price, grew about $3 per share to about $600 (per share.) So very substantial growth. It's kind of a lesson that you learn in life. If you have the right thing at the right time in a growth market, it can grow very fast, which is one of the things we have here at CounterPath. The right thing - with a user interface - from a screen. Well, most of us today, whether it's a mobile phone or a PC laptop or desktop, are using screens. How do you interact between the network and the system and the features, functions and services with your screen, keyboard and mouse at a time when the underlying voice network is ingrained as part of the applications? That's where we take a leadership position. The company's products have been selected by BT (British Telecommunications PLC), Deutsche Telecom, AT&T.

It's been selected by Mitel, by Cisco, by Avia and Nortel. So the service providers, large and small - as an example, Vonage - have selected the company's products. You might see it as a BT product, but the technology came from here (in Vancouver). It's effectively right in your face.

I mean, it is the interface into the networking services that you would use. The timing, in my view, is very right. At this point in time, there are 150,000 downloads a month and this is only the start. So I'm already feeling very good about the company."

10. How did you get involved with CounterPath?

"I made very large investments in NewHeights (which are) more significant investments than CounterPath and CounterPath already has the channels to market. A parallel would be, you sell Chevy cars, but you also sell Pontiacs and Buicks and Cadillacs. So the NewHeights products developed in Victoria are like the Cadillac end of the scale for business users. The CounterPath products are like the Chevrolets. Very high volume. These are very important things to put together. In any successful company, chemistries matter. The chemistries in this business have been very good. That's what gave me encouragement. It moved very quickly from concept and talking to pulling the companies together - a total of only about three months. I'm impressed enough to make additional investments of about $5-$6 million. This is a big investment."

11. How were some of the companies you're involved with affected by the tech crash in 2000?

"I think pretty much every technology company was hit by that tech crash. But it's wrong to think that everybody went out of business - because they didn't. Everybody was hurt in some degree. But you have to go down to the lower layers to find out just how much."

12. How were you affected?

"Well, actually, not very much, because I'm not a big seller of shares. I actually invest in companies for the long term. None (went under). Now, did share values go down? Well, of course, the answer is yes. But do you still own the shares? Yes, I do. Let's not try and mask it. It's pretty much 100 per cent certain that every company was devalued."

13. Do you invest in other industries?

"Only on a personal level. I got involved in two hotel resorts - one (Brookstreet Resort) five minutes from my home in Ottawa and one (Celtic Manor Resort) five minutes from my home in the United Kingdom (in Newport, Wales). They have golfing facilities. One of the reasons, I find, is that the very senior people in the companies that I do business with play golf. And I have the best golf facilities. In fact, the one in the U.K. is the venue for the 2010 Ryder Cup.

I built a very special golf course and golf club specifically for the 2010 Ryder Cup."

14. What's your handicap?

"I don't play. Ha! Ha!

But my kids do and my customers do, and many of the employees."

15. How has the technology industry changed, compared to 10 years ago?

"Well, it's more open and, I'd say, (has) more opportunities than ever."

16. What would you say are some of your memorable business experiences?

"Going public for the first time - whether that's Toronto or New York or London.

That's an experience in its own right. Learning how to optimize if it's a public offering. By optimizing, I mean, if you do something untoward - let's suppose the company that you're taking public has peaked - you should never take it public. You should be absolutely certain, when you take a company to the public markets, that you have good visibility of a go-forward growth path, because (otherwise) you'll get punished if you rib the public shareholders. You'll never get forgotten."

17. When a tech company is starting out, do you think the ultimate goal should be to go public?

"Oh, no. Not necessarily. It depends on the company and its position. I mean, everyone is unique. In my particular case, I typically (lean) towards some sort of liquidity - either a sale of the company or, to a degree, heavy-duty dividends or take it public. Most of the time, out of the almost 70 companies I've started, many of them have been taken public or acquired. So it's a process that I'm very familiar with. I've been in the industry a long time, so I know lots of people, whether it's on the professional side with the investment bankers or whether it's industry professionals that are on the technology or service-provider side."

18. How have you tried to educate yourself since you were on a different track (as a technician) when you started out?

"I've been in the same basic business since I was an apprentice. One advantage of that is that you generate an awful lot of what you might call networks of connections - you know, people. I find, in the communications industry, people stay in it. They enjoy it.

"It's very heavy on the engineering side, on the business side, so that's come to work for me very well."

19. What do you see as the future of technology, given that there's a lot more dependence on it now than there has been in the past?

"That's correct. Remember: There has been a sea-change in terms of the underlying fabric of what you would call narrow-band connection or telephony. You know, pick up a phone by dialling? I would call that a narrow-band connection fabric that's covered the world - people at home and people in business. In the last five years in particular, and 10 years generally, the underlying fabric has changed to broadband. That means you can run video and other things very rapidly. You can accommodate that. But it's not only that. It's a common protocol called IP. And then, in addition to that, it's always on. It isn't, 'pick up a phone, get your dial tone, dial.' It's an always-on broadband IP environment. In that environment, there's a sea-change of opportunities. Every industry of every type is going through a transformation. My industry right now is the type that is very active. That's why I'm very active at CounterPath - because they are in your face. That is what they do."

20. If you weren't involved with the technology industry, what would you do?

"Nothing. This would still be my hobby. In fact, it is my hobby. I am an enthusiast as well as a business person as well as a technologist as well as what you might call a general industrialist. But above all, because I am an enthusiast in the industry, I can do things before others see that they're important - and I take advantage of that."

Sir Terence Matthews

* Title: Chairman.

* Born/raised/age: Newbridge, Wales/63.

* Education: Matthews obtained certificates in electrical and mechanical engineering and an honours degree in electronics from the University College of Wales.

He also has several honorary degrees, including a doctorate from Carleton.

* Family: Matthews does not discuss his family, but his son Owen is the co-founder and CEO of NewHeights Software.

* Career: Matthews is chairman of holding company Wesley Clover and also serves as chairman of Mitel and March Networks, two companies that develop Internet protocol (IP) systems for enterprise applications. He began his career as an apprentice in a British Telecom research lab in Suffolk, England. After completing his education, he emigrated to Canada and joined MicroSystems International, then a chipmaker affiliated with what is now Nortel.

Matthews later formed Mitel Corp., a world leader in the design and manufacture of enterprise voice systems and products, which was acquired by British Telecom in 1985. He also launched Newbridge Networks, which employed more than 6,500 people and reported year-end revenues of $1.8 billion when it was acquired by French giant Alcatel in 2000.

* Wiki-fact: According to Wikipedia, his first enterprise was with fellow British immigrant and MicroSystems colleague Michael Cowpland, who would later go on to found Corel Software. The two set out to import and sell electric lawnmowers from the U.K. They named the company Mitel, a shortened version of Mike and Terry's Electric Lawnmowers. But a shipping company misplaced the mowers. By the time they arrived, Ottawa was covered in snow and nobody wanted the mowers. As a result, Mitel morphed into a home-based technology consulting company for such clients as the National Research Council, the Communications Research Centre and tech startups such as SHL Systemhouse and Quasar Systems, which are now viewed as industry pioneers.

* Stats: During his career, he has launched between 60 and 70 telecom companies located primarily in Canada. As a result of those efforts, he was knighted in 2001.


CounterPath Solutions Inc.


* Brass: Sir Terence Matthews, chairman; Greg Pelling, CEO; Donovan Jones, president and chief operating officer; David Karp, chief financial officer; Jason Fischl, chief technology officer; Andrew Fisher, executive vice-president of business development.

* Profile: Since 2003, CounterPath has developed multimedia VoIP (voiceover Internet protocol) softphones and SIP applications. CounterPath emphasizes a flexible, user-friendly and feature-rich product suite that enables clients to integrate or bundle voice, video, presence and instant-messaging applications into its VoIP solutions. The company's clients include some of the world's largest telecommunications service providers and network-equipment providers such as AT&T, BT (British Telecommunications PLC), Alcatel-Lucent and Cisco Systems. Last month, Counterpath acquired NewHeights Software in a deal that saw Matthews become chairman. Some analysts have likened the deal to a reverse takeover by Matthews. But CounterPath executives have wholeheartedly endorsed the arrangement, expressing hope that Matthews will substantially boost the penny-stock public company's profile.

* Stats: More than six million people worldwide use technology powered by CounterPath and make 150,000 downloads per month of its free X-lite softphone. The firm has 100 employees serving 250 client companies in more than 50 countries. CounterPath reported revenue of $1.2 million for the period ending July 31, compared to $1.8 million for the same quarter a year ago. Total revenue for the last fiscal year, which ended April 30, was $5.7 million, which marked a 24-per-cent increase from the previous year's $4.6 million.

* Recent Stock Price: (OTCBB:CTPS) $0.37 (52-week range, $0.31 - $0.46).

* Website: www.counterpath.com

* HQ: Suite 300, One Bentall Centre, 505 Burrard St., Vancouver, V7M 1X3

* Phone/Fax: (604) 320-3344/(604) 320-3399.

(Monte Stewart can be reached at monte@businessedge.ca' target='_new'>monte@businessedge.ca' target='_new'>monte@businessedge.ca' target='_new'>monte@businessedge.ca' target='_new'>monte@businessedge.ca' target='_new'>monte@businessedge.ca' target='_new'>monte@businessedge.ca' target='_new'>monte@businessedge.ca)