New Madrid firm bounces back from telecom bust

NEW MADRID, Mo. -- In the spring of 2001, New Madrid's Kontek Industries was facing extinction.

The fall was sudden. Just three months earlier, it was a leading nationwide builder of remote stations for a burgeoning and seemingly boundless telecommunications industry that had apparently withstood a major stock market setback nine months earlier. Kontek's contracts for 2001 promised a bottom line that would exceed 2000, already a record year, by almost 50 percent.

But then the ride was over. In early 2001, the Wall Street telecom rumble from the previous March reached Missouri. Kontek lost more than 80 percent of its business.

"It was time to rethink business or rethink our resumes," recalled Kontek chairman Charles Merrill.

Kontek chose the former and decided to adapt to a changing business climate. Now, with the help of its government representatives, Kontek has reinvented itself in an attempt to saddle another new and growing industry -- homeland security.

Riding fiber

In 1986, Kontek Industries started out as a modest business, building large glass-fiber-reinforced concrete square boxes that were used largely by telephone companies as remote shelters. But as the telecommunications revolution of the 1990s hit, Kontek got swept up in it.

Fiber optics, pagers, cell phones, personal data assistants and eventually wireless networks dominated the business lanscape, and the rapidly growing telecom companies were buying up Kontek's remote stations like never before. By decade's end, the company saw annual sales of around $2 million in the mid-to-late 1990s blow up to $10 million in 2000, even in the wake of a March Wall Street tech stock crash that saw telecom stock prices plummet more than 35 percent in a matter of weeks. The future held apparent promise as well.

At the beginning of 2001, Merrill said that Kontek had already been contracted to do $18 million worth of jobs that year. But then came the quake. Aftershocks of that March 2000 crash began to take a toll on companies.

"It took a little over nine months for the crash to affect us, and it absolutely crucified us," Merrill said. "A lot of big fiber companies went under. Others came close."

Kontek's core business dropped off by more than 80 percent. Of the $18 million in jobs that the company had contracted for 2001, only $3 million came through. The other $15 million was canceled by companies that had gone bankrupt. In a matter of months, Kontek's employment went from 100 to 20. The company was in trouble.

The answer

With the use of the company's trademark remote stations limited mostly to use by a telecommunications industry that was slow to get off the mat, Kontek couldn't just wait around. It was going to have to restructure its business or face the fate of many of its former clients. With a 150,000-square-foot facility dedicated primarily to the pouring of concrete, options were limited.

The solution to Kontek's problem actually presented itself later that year, in the aftermath of Sept. 11, 2001. The terrorist attacks heightened concerns about security throughout the nation, especially at military outlets. Suddenly, armed forces bases around the country were looking for increased protection from attack in the way of huge barriers made out of concrete.

Merrill and company began researching barrier construction techniques and scanning the Web for federal government contracts. They also started going to homeland security trade shows to keep up to date with technology and design.

Finally in late fall of 2001, using the New Madrid area's government status as a HUBZone (Historically Underutilized Business Zone, which gives small businesses in these designated zones special preference in obtaining government contracts) as leverage, Kontek landed a $5 million deal to build concrete barriers for weapons bunkers at an Air Force base in Virginia. That job set off a brainstorm in the Kontek front office.

"It really got us thinking," Merrill said. "We could see the real possibility of success doing government work. We thought, 'Hey, this might be a real business.'"

The next step was going to U.S. Rep. Jo Ann Emerson to ask for help. Coincidentally, she had heard about a growing need of nuclear facilities to bring their sites up to increased Nuclear Regulatory Commission standards. Given its recent work in Virginia, Kontek seemed to be a perfect fit.

Business security

With the help of Emerson, Kontek strengthened its ties with the University of Missouri engineering schools at Rolla and Columbia, which both did blast mitigation work and research on different types of concrete barriers. That research combine with Kontek facilities and Emerson's political connections has brought Kontek back to the forefront of a new and expanding industry. This time homeland security is Kontek's new cash cow.

Kontek is currently under contract to install concrete barriers for perimeter security at 12 nuclear facilities throughout the country. Furthermore, through research done in cooperation with the universities, Kontek has patents pending on several designs of concrete delay and blast resistant barriers. Kontek is back on top.

"We were just in the right place, with the right idea, at the right time," Merrill said.

The company still makes telecommunications boxes, but that constitutes only 5 to 10 percent of Kontek's business.

Merrill expects the company to do over $15 million in business this year, and he says in the coming years, the ceiling on this new industry is not yet visible. He also expects Kontek's employment to be back up to 60 employees soon, with room for further growth likely.

trehagen@semissourian.com

335-6611, extension 137