—John Stroup is president and CEO of Belden, a historic wire and cable company that now makes two-thirds of its revenues from networking and IP-based products and services. Belden broke out of its wire and cable mold with the 2007 acquisition of Ethernet switch maker Hirshmann, but the shift did not fully register in the television sector until its 2012 purchase of Miranda, and earlier this year, of Grass Valley. (See
“Belden’s Broadcast Evolution.
”) Stroup spoke with TV Technology
Executive Editor Deborah McAdams at the NAB Show in Las Vegas in April about the company’s transition from a cable manufacturer to a workflow component provider.
Techology: John, a
couple of years ago you ran a cable company. What happened?
Belden is of course
synonymous with cable. It’s been around for 100 years.
About six years ago, we developed a point of view that we really wanted to
expand our product set into the markets that we already serve, and the markets
we serve are enterprise, industrial and broadcast. And in the broadcast area,
we got real excited about the idea of getting more involved in active
components and we made the acquisition of Miranda in July of 2012.
Technology: That radically changed
the Belden brand, but cable is obviously still a very strong part of the
business. What percentage of the business is that?
So I think now with the
acquisition of Grass Valley, the percentage of revenue from cable products is
about 35 percent, and when I joined the company in ’05, it was almost the
entire company. We did make an acquisition in ’07 that’s not well known in the
broadcast industry, but very well known in the industrial automation industry,
called “Hirschmann,” and that was very significant for us, because it was the
first meaningful acquisition we did outside of cable products.
Technology: There’s an IP transition going on. What dos that mean for the future of
It’s interesting, because
we’ve been dealing with this trend for a long time. It happened in enterprise,
already. A lot of people forget this, but there was a time when Belden was
supplying proprietary cable to the enterprise market, for both telephonic
applications and of course, Internet protocol. So that transition happened, we
dealt with it quite well.
There’s actually been quite a transition happening in the industrial market
already. So that company, Hirschmann, I told you about, that’s industrial
Ethernet switches for industrial applications. Obviously, and that’s all
And we think the same thing will likely happen in broadcast. It almost always
happens slower than people expect. There’s lots of migration that has to happen;
there are a lot of existing products. I think what’ll likely happen is there
will be the same type of form factors, but they’ll need to be designed
specifically for the application.
So there are all these
legacy systems in place. You have legacy connectors in place, you have
preferences that people have in terms of how they use equipment, sometimes it’s
environmental. So for example, in the industrial application, we’re using
category cable, but it’s designed for rugged applications—fiber, copper-based
technology. So our view is that there are always opportunities to make it
easier for the engineer responsible for buying the products.
Technology: But that fragments
your product offering to a degree. Does that make things a little tougher, with
higher overhead, for you guys?
Not really, I mean I
think that… we really do pride ourselves at Belden at being good at managing
complexity, so we actually like complexity.
We kind of view ourselves as a high-mix, low-volume company, we’ve always had a
strong commitment to lean manufacturing, so almost everything we make is built
to order. (Belden’s “Lean
We don’t build to forecast, we build to order. So to the extent that we have
more SKUs, we have more complexity, we kind of view that as a competitive
advantage for us and not something that really worries us.
Technology: Since the Miranda
acquisition, Belden stock has doubled. Does that signal some optimism about
broadcasting, about the media space?
Yeah, I think there’s
probably some of that. I mean I think first of all, we should recognize the
market in general has done well in the last 18 months…
Technology: Not that well!
We’ve done better,
that’s good… we appreciate that, but there’s been a bit of a rising tide. I
think probably for us is the acquisition of Miranda, followed by another
acquisition of a company called “PPC” that was done in December of 2012. That,
for us, was a bit of a tipping point. That’s when more than half of our revenue
was coming from products other than cable.
I think that our investors began to appreciate and understand that our business
model was changing, and therefore, the valuation of the company should be more
like that of a connector company or an active components company. And I think
that’s one of the reasons why our stock has done so well since then.
Technology: That diversification
of products and services, basically…
Yeah, and I think maybe
just a larger percentage of our total business coming from higher margin
products, more applied products, typically multiples are affected by margins
and growth rates. And so, we’re in higher margin businesses, we’re in faster
growing businesses, and I think it’s reflected in our share price.
Technology: As we discussed, for
many decades, this was a cable-centric company, and now, there’s a very broad
product line. What are the challenges there of managing all of that, of seeing
the big picture?
There are things we try
and do in a central way and there many things we do in a very distributed way.
So the things that are common amongst us, is we have a common business system,
so we look at our financials the same way, we run our factories the same way,
we have a common career development approach, we have common values, these are
things that are common.
Technology: Operational things...
cultural…and then we also have many things that are done at the platform level.
So, a Grass Valley, which is a $500 million business for us today when you
combine it with Miranda—most of the strategy’s done at that level.
There are some things that kind of ties us together. So, for example, any sort
of innovation that may happen in Ethernet technology, we see that in multiple
businesses and try and leverage that as best we can.
But the diversification is generally—or I should say, the diversity of
technology and products—tends to be managed t the local level.
Technology: So you’re kind of
hands off and the division chiefs report to you..
I don’t know if they
would tell you I’m hands-off. I have a bit of a reputation for being involved
in the details. But yeah, it’s a common
business system, a common business approach.
We’re very metric oriented. We want to be very customer-centric. And we feel
like there’s a right way to run a business, and we ask all of our businesses to
run their businesses that way, even though the strategies and the competitive
environments may be different.
Technology: The U.S. market,
especially broadcasters, are under a lot of pressure. Does Belden’s purchase of
Miranda and Grass Valley seems to signal optimism about the sector?
Almost everybody is
really comfortable with the idea that consumption of video is increasing at a
rapid rate. Now, how that gets monetized is a little bit complex. But if you take
Belden and make it into its simplest sort of construct, we are a necessary
element for delivering video, audio and data from one point to another. That’s
what we do.
I think investors are convinced that consumers are going to want more of it.
Whether it’s you and I with our iPhones, or whatever it is you carry around,
we’re watching more video. If I watch my daughter, who’s 14 years old, she
carries her computer around, watches TV [shows] on it all the time, she never
wants to watch it on TV, she wants to watch it on the computer.
Those trends, I think, when we talk to investors, they’re all like,
“absolutely, that’s the case.”
I think what’s hard for investors to figure out, is who are the winners and
losers. So what’s going to happen to the long-term network companies? What’s
going to happen to companies like Comcast, or DirecTV… there’s always some
concern about who’s going to win and who’s going to lose.
I think what they feel comfortable with about us is that we sell to all those
companies. So if Netflix ends up doing really well, which they have been, and
they displace others, we’re fine, because they all need our equipment. In a
simple way, we’re kind of the plumbing, to make this stuff work.
Technology: Why Grass Valley?
Grass Valley was for us, a very, very logical product extension and fortunately
for us, it also came with an enormously powerful brand and scale.
But at the root of the decision we took, is they had products, and strength in
products we didn’t have, that we felt we needed. And the fact that their brand
was so well known was fabulous. The fact that we were able to take a business
from $200 million to $500 million, which allows us to get economies of
But the big initiative was around product extension. [The Miranda product line was heavier in routing, playout, multiviewers,
monitors, graphics and branding, while Grass Valley focused more on production
switchers, automation and editing, servers, cameras and camera systems
TV Technology: So, the FCC question. There’s a lot of regulatory fluidity and
uncertainty. How does that affect your business and your business decisions and
your planning… or does it?
Not as directly as you might
think. It impacts our customers significantly. To the extent that it’s
affecting them, we need to understand it…
TV Technology…and presumably
their budgets, right?
Yeah, so it can certainly impact their capital expenditure and
that has a huge impact on us.
But I would say in general terms, there are as many situations where it creates
an opportunity as it does create a threat, in terms of how they manage through
For us, the big thing that our customers are dealing with is, even though
they’re under a lot of pressure to make more money, that often is a good thing,
because our products are used to automate and to improve their productivity and
So the very fact that our customers are trying to become more profitable is a
very wonderful stimulus for us, because our products are capital. They make
investments in capital so they generate more revenue, become more productive.
Just walking around the booth the other day and I saw some of the advancement
in camera robots, which is interesting to me, because on the industrial side of
our business, we do a lot with robotics on the factory floor. Robotics have
been on the factory floor for a long time.
And now you see more of it coming in broadcast, for the same reason—trying to
become more efficient.
Technology: So are there a lot of
synergies like that between industrial and the other divisions?
I would say there are
more between enterprise and broadcast than there are with industrial. There are
some common technologies that are used in our industrial IT business and the
Miranda-Grass Valley business, so there is collaboration there at the
In terms of a customer level, collaboration amongst the platforms is not that
Technology: Do you think [in] the
broadcast market, more clients are looking for a single vendor to cover the
I don’t know if they
express it that way. They certainly want things to be easier. So that you hear
a lot. They also have to be mindful of the fact that if they go down a path of
best-of-breed, they’re always vulnerable to one piece of the puzzle falling
That can be a financial issue, that can be a technology snafu. Customers seem
to appreciate the fact that Belden is financially stable. They seem to
appreciate the fact that our track record is one of long-term investment, and
somebody with a lot of experience with customers, and certain they’re taken
Belden’s been selling cable to CBS, NBC, ABC for a long time. So when we made
these acquisitions and we went to visit them, the general reaction was, yeah,
we know who you are. We trust you, and you understand our business, and that
makes us feel good.
Now, as a CEO, you’ve got to make certain your employees don’t ever rest on
their laurels, and don’t take that the wrong way. We’re only as good as our
last project, and we’ve got to keep innovating and service them as best we can.
Technology: I do remember when
the news came out about Miranda, because we all knew Miranda was in play, and
we all went, “Belden?” It was very much a surprise.
We had a strategic plan
nobody knew about for many, many years before that. I’d been studying Miranda
before then. I’d had conversations with the CEO of Miranda months and years
So, yeah, we knew it was a surprise. It was very similar to the reaction of
when we bought Hirschmann in the industrial space…
Technology… who are these guys?
Yeah, and in 2007, it
was even more of a surprise, because we were exclusively a cable company, and
we went out and bought an Ethernet switch company, that had gross margins of 70
percent, compared to cable products, which have a gross margin of 30.
And, our biggest competitor was Cisco. So people thought, wow, that’s a big
change for a cable company.
Technology: Belden has gone from
being a St. Louis-based operation to one having locations across the continent.
What are the challenges there?
That, I’m pretty used
to. Before joining Belden in 2005, I worked as a senior executive for a company
called “Danaher,” and I was responsible for global business operations around
And my background incudes engineering, and the products that I’m most familiar
with are complex higher-margin products, so quite frankly, I personally had a
hard time adjusting to a cable company than I did adjusting to the new company.
St. Louis is our headquarters, although it’s a small office. We have about 40
people. We’ve got some financial people, the legal team, human resources…
All over the world.
United States, Canada, Mexico, China, Brazil, Germany, Czech Republic, United
Kingdom, France, Netherlands. Our businesses decide and determine their own
manufacturing strategy and where they want to build products. We tend to build product
pretty close to consumption. There are a few exceptions to that.
TV Technology: So none of the things going on in the
broadcast business are really new to your operation in terms of adjusting to
Yeah, it feels very much
at home. In fact, we just had a meeting a little while ago with one of our
bigger customers, one of our bigger Grass Valley customers, and I was sharing
an experience with them about one of our industrial customers, which was a
global automotive company in Germany, and they’re a big customer of ours.
I was saying to this particular broadcast customer, that you can imagine how
the conversation would go if we’re the reason they stopped making cars. That’s
a very uncomfortable conversation.
So we’re very familiar with the idea of mission critical, that stuff has to
work all the time. Migration is really important. You can’t leave them stuck.
You can’t have a dead end, and you can’t just come in one day and say, “look,
we’re not going to support you any longer.”
So that’s all very familiar to us.
Technology: Most importantly,
John, what is your handicap?
I’m a 12, and I’m really
confused about whether I want it to be better or worse. Because the ego side of
me wants it to be 10, but the pragmatic side of me knows you’re always better
off having a higher handicap, because then you get strokes.
TV Technology: As a
closer, is there any specific message you’d like to get across to the industry?
The thing that I would
like everybody to know is that we take a lot of care with the responsibility
that we have, and at the end of the day, customers define our success. So our
customer relationships are more important to us than anything.
And we realize that when you do transactions of this size, it can create
distractions. And so, we want to minimize that, we want to make certain that we
take the time to stay connected to our customers, to help them through things
the best we can.
We have an integration strategy that we’re executing, but we want to be very
transparent with people about what we’re trying to accomplish. Customers matter
to us more than anything, so that’s where our focus is.