When Telect Inc. celebrated its 15th anniversary five years ago next month, the gala affair in the Opera House downtown celebrated a big expansion of its Liberty Lake campus, the opening of a new plant in Mexico, and the expectation that its annual sales would soon top $100 million for the first time.


Employment at the maker of products for the then-burgeoning telecommunications industry had blossomed to 800, and it already was eyeing additional manufacturing space here, as well as new operations in Europe and South America.


And all that was before an explosion in sales and employment that, three years later, left Telect with annual revenues of $265 million and a global work force of nearly 2,300.


On the eve of Telects 20th anniversary, the landscape is much different.


The telecom industry has gone from blinding sprint to painful crawl.


In a series of devastating job cuts that began in early 2001 and continued through last week, Telect slashed two-thirds of its work force and now employs about 630 people worldwide, roughly half of whom work here.


Sales this year likely will total just a third of their 2000 peak.


So the message company President and CEO Wayne Williams will deliver to employees on the companys 20th anniversary Sept. 13 wont be one of soaring production and unfilled jobs, but rather one of commitment to recovery, fiscal responsibility, and reawakened entrepreneurial zeal.


We will get back to 20 percent to 30 percent annual growth, says a humbled but determined Williams. But we will manage it differently.


The 38-year-old son of Telect founders Bill and Judi Williams led the company through much of its phenomenal growth in recent years, and says now that, with the exception of a wild 2000, it wasnt a mistake for Telect to grow so quickly.


I dont think we were growing too fast in the previous five years (1995 through 1999), Williams says. It was 2000 that killed us.


Telect entered that year with the expectation of achieving 20 percent growth in annual sales, which would have put it just over $200 million.


First-half sales, though, shot up an unexpected 69 percent compared with the year-earlier period, and Telect scrambled to meet customer demandexpanding its facilities and hiring hundreds of new employees. One executive at the time described Telect as having its hair on fire.


We went through our entire labor stores. Sales were soaring, and there was no indication it was going to end, recalls Williams. Youre always taught to listen to the customer, and when the customer wants product, youre going to figure out a way to fill the order.


Telects order backlog grew to $50 million, and the buyers were telecoms brightest stars at the time, including AT&T, WorldCom, Nortel, Sprint, and Time Warner.


By the end of that summer, faced with even more growth and capital needs, Telect filed papers to go public, seeking $150 million in an initial public offering.


The tide turns


But Telects timing turned out to be poor. As it worked through the IPO regulatory process, the high-tech industry began to weaken and the capital markets began to dry up.


Telect postponed the offering in December 2000, and announced its first layoff two months later.


Williams says the downturn, as crippling as it was for Telect, could have been worse. The companys diverse product mix helped it see relatively early the chinks in the tech industrys gleaming armor.


Telect began hearing warnings from customers in some of its product sectors, which range from copper to fiber optics wiring and broadband connectivity to power management, and decided to tighten its belt.


More specialized competitors, Williams says, kept up the breathless production pace longer because their specific product lines were temporarily isolated from the decline. When the bottom of the market fell out, their decline was steeper, he says.


Also, Telect had been launched in tough economic times, back in 1982, and survived both the mini stock market crash of 1987 and the 1990-1991 recession. It had dealt with downturns before, Williams says, adding, Well work through this one as well.


The work hasnt been without pain, though.


The telecom decline hit Telect hard in the form of canceled orders and uncollectible receivables. Some of those rock-solid customers that had demanded products and were obliged by Telect had crumbled. One had ordered $15 million worth of product, and after Telect had put together half the order for shipment, the customer, facing economic woes, reneged on the order. Other customers fell into bankruptcy owing Telect money.


Weve been stung, says Williams.


Still, he says, Telect was loyal to its big customers, even when they ended up in Bankruptcy Court. The company that canceled the $15 million order is still a customer today, he says.


We worked through it with them, and when they come out the back side, theyll remember us, and well be there, he says.


Through all of this, he adds, we picked up market share.


Williams says the experience also taught him to look beyond Telects customers to its customers customers. His hope is that he might be able to spot ahead of time when demand by the end users is ebbing, rather than waiting for his customers to cancel orders or fail to pay a receivable when they feel the slump.


Meanwhile, though the layoffs have made for dark days for Williams, he says Telect has remained cash-flow positive to neutral through the downturn.


Telect has closed its small manufacturing operation in Sao Paulo, Brazil, and has sized down dramatically its operations in Wroclaw, Poland, and Guadalajara, Mexico.


Its sales and customer support center in Southhampton, England, also has been scaled back. Telect isnt concentrating any longer on where its next big plant will open or expand. Now, it will focus manufacturing in Wroclaw, Guadalajara, and Liberty Lake, Williams says.


Back home, Telect in December finally will give up the space it has leased at the Spokane Business & Industrial Park since its inception. At Liberty Lake, its 2-year-old auxiliary plant next to its headquarters complex has been leased to Itronix Inc. The former Accra-Fab Inc. plant next door that was acquired by Jubilation Inc., a real estate holding company owned by Bill and Judi Williams and which owns the Telect campus, is vacant and available for sale or lease. Wayne Williams says Telect might even consider subleasing out some of its vacant office space in its main headquarters building.


Bouncing off the bottom


Williams isnt throwing around predictions about a recovery in the industry, or when Telect will grow again.


The whole level of business has just come down, says Williams. Were riding through a big storm.


At a business gathering here last fall, he had said such a recovery wouldnt come before the fourth quarter of 2002 or early next year. He says now that Telects sales climbed 18 percent in the second quarter, giving the company signs of hope, but more bad news in the telecom industry has since dampened sales again.


Last week, Telect announced another layoff, this one consisting of about 50 administrative and professional-technical jobs mostly at Liberty Lake.


Weve touched the bottom of this thing two or three times, says Williams. Were just sort of bouncing there.


Telect, he says, is starting to see stronger stability in order rate, and he predicts that business in September will either signal a slightly better than stable environment or a precipitous drop-off. Im leaning toward the first right now, he says.


Meanwhile, Williams asserts that the downturn, in the end, will make Telect a stronger company, and says that after spending months dealing with devastating layoffs, hes found a bright spot in Telects reinvigorated quest for business.


He says that amid Telects layoffs, The wind was really out of my sails. I was devastated.


Now, hes feeling somewhat invigorated, as Telect fights for sales like the entrepreneurial venture it once was. This takes me back to 1985, and I love it, he says. Were tenacious. Were hungry.


Before the downturn, Telects biggest challenges were keeping up with orders and finding enough employees and manufacturing space. Today, says Williams, We need to generate revenue. We need to demonstrate that even during the storm, there is hope for our employees and our customers. And we need to pay attention to cash. Pay attention to our finances.