No longer the shining star of high-tech manufacturing here, Liberty Lake-based Telect Inc. has settled into a new role as a scrappy fighter in the rough-and-tumble telecommunications equipment industry, and that appears to suit CEO Wayne Williams just fine.

The company, which employed roughly 2,300 at its peak in 2000, just before the dot-com bust, today employs just 430 people worldwide, and that number is down by about 300 from two years ago. Meanwhile, sales have inched up each quarter this year, compared with the previous quarter, and Williams expects 2010 to be reasonably good for the company.

"The good news for us, even though like everyone else we're down from last year, telecom and broadband is stabilized, relatively flat to up," he says. "I'm going to guess that fourth quarter will be better than fourth quarter last year."

Perhaps more telling, Williams says, is that the company has become extremely lean, reducing employment and costs without reducing production levels, and also is gaining market share during the recession.

"Our team every day is getting more productive with less," he says, adding, "We're profitable. We're bank-debt free."

Telect, which develops and manufactures connectivity equipment, wiring components, and related gear mostly for telecommunications companies, operates two manufacturing plants—one in Plano, Texas, and the other in Guadalajara, Mexico. Its 52,000-square-foot headquarters facility here houses administrative, sales and support, and product development teams, but no manufacturing. It closed its plant in Poland at the end of last year and sold its former manufacturing and headquarters complex in Liberty Lake to local manufacturer Itron Inc. in 2006.

It also has transformed itself in recent years, outsourcing more of its functions and concentrating on being lean and agile, as opposed to its focus in the late 1990s of trying to do everything internally and hiring aggressively to accomplish that. It has retooled its sales team as well, with new pay structures that made salespeople hungrier and strategies that provided more information and problem solving to customers, Williams says.

"It's like the old days—the 1980s and early 1990s," he says. "We're going after sales aggressively. We're competitive in this environment."

No stranger to cutting jobs when the industry it serves suffers, Telect now has stabilized some in terms of employment, Williams says. The company's most-recent restructuring occurred early this year, he says.

"That has us in a different frame of mind than our competitors," who still are contracting, Williams says.

"Our mental focus right now is, we're not distracted by restructuring. We can be on the offensive, although running an offense is a lot tougher than it used to be," he says.

Customers are far more cautious today about making capital investments, Williams says, adding that there are fewer customers out there, due to industry consolidation, which means there are fewer decision makers.

That dampening, however, can be viewed in the context of significant opportunities in the telecom industry, he says. Williams explains that as the popularity of smart phones continues to skyrocket, and use of those phones puts greater stress on the telecom infrastructure due to their high demand for bandwidth, telecom companies will have to spend money on gear to accommodate that demand.

For instance, he says, only a very small percentage of cellular transmission sites have fiber-optic lines extended to them. As companies equip their cell sites to transfer greater bandwidth, they'll be in the market for the type of connectivity equipment companies such as Telect sell.

Although Telect's product mix hasn't changed significantly in recent years, its acquisition of Santa Barbara, Calif.-based Hendry Telephone Products in late 2004 gave it a broader line of cabinets and racks into which Telect's traditional products can be installed.

"I think we've got the broadest breadth of product line of companies in our industry," Williams says. "We build the racks, the cable management, the power systems, and the connectivity pieces."

The company also continues to invest in research and development, spending about 6 percent of sales on such efforts, which Williams says compares with an industry norm of about 3 percent of sales. Even that work has changed at the company, he says.

"We are much more selective in R&D," Williams says. "We're looking for more base hits and doubles, rather than home runs, but those base hits are paying off—we expect a stronger 2010 because of them."

He says the company expects to launch a new product line by late this year or early next year, but declines to say more about it, due to the competitive nature of the industry.

In 2007, Telect launched a new line of products aimed at the residential market. The equipment, like the products it sells to telecom companies, provides voice-and-data connectivity, but fits in a small cabinet designed to be a central distribution point in a home for telephone, television, and computer data wiring. Williams has said he believes that consumers' demand for connectivity, whether with their mobile phones or in their homes, will help drive what telecom companies do in the future, and that Telect needs to be in a position to provide equipment throughout the entire pipeline, from home to switching facility to cell site.

Sales of that residential product line, however, have been slow to come, and although Telect continues to offer the products, they represent just a tiny piece of its overall sales and of its sales emphasis, Williams says.

Telect currently employs about 75 people at its headquarters facility in Liberty Lake, which once had been a supplementary manufacturing plant when the company was growing quickly at its former sprawling campus just to the east. While Liberty Lake once was the hub of its U.S. operations, its only U.S. manufacturing facility now is in the Dallas suburb of Plano, which it acquired in the Hendry acquisition. There, it does final assembly and warehousing of nearly all its products. It employs 140 people there, down from 242 in mid-2007.

Its other manufacturing plant, in Guadalajara, currently employs 195, down from 260 in mid-2007.

Both plants have undergone aggressive lean-manufacturing efforts, Williams says.

"We now can produce more with fewer people," he says. "Our people like to say we're moving beyond Toyota," in reference to the big automaker's notoriety for lean manufacturing strategies.

Williams says that as demand climbs, it's easy for companies in his industry to want to begin adding employees, but Telect is remaining conservative in its hiring for fear it won't be able to keep its commitments to workers if the industry's fortunes aren't consistent.

Today, about 90 percent of Telect's sales are to customers in North America. "That's our focus now," says Williams.

The company dropped about 100 jobs when it shed its plant in Wroclaw, Poland. It also closed its sales and support office in Great Britain late last year, though it still employs a couple of salespeople based in Europe.

The privately held company no longer divulges sales figures, Williams says, due to the increasingly competitive nature of its industry. The most recent year for which Telect provided sales figures was 2008, when sales were about $80 million. That's higher than the $60 million in sales the company fell to after the telecom industry collapsed early this decade. Telect had peaked in 2000 at $270 million in sales.