Look at Itron Inc. and youll see a maker of automated meter-reading systems for utilities worldwide that in the last two years has boosted its sales, profits, and work force at a time when many other high-technology companies have struggled.


When company CEO LeRoy Nosbaum, looks at Itron, however, he isnt nearly as satisfied. He wants the Spokane-based company to be much more than a maker of meter-reading systems, no matter how much success it has had in that role.


We see our future as bigger than that, says Nosbaum. Our vision is larger than that.


The companys future, he says, is as a multi-purpose resource for its utility customers. The companys acquisition of LineSoft Corp., the fast-growing Spokane-based software and engineering-services company that caters to the power industry, is Itrons first major acquisition outside of the meter-reading business, and is its first step toward its larger vision, Nosbaum says.


Itron completed its acquisition of LineSoft last month. The transaction was valued at $41.4 million, and included $20.4 million in cash and 849,000 shares of Itron common stock worth a combined $21 million at the time of the purchase. LineSoft, which was launched here in 1989, had been owned by LineSoft founder Fred Brown and GFI Energy Ventures LLC, of Los Angeles.


Nosbaum says that over the next 10 years, utilities increasingly will look for ways to get the most out of their infrastructure investments, and believes that in addition to Itrons meter-reading products, the LineSoft acquisitionwith its suite of software products used in transmission-line engineering and other functions related to power distributionwill position it to take advantage of that trend. Indeed, Brown often mentioned that trend when speaking of LineSofts promising future and soaring growth projections.


More product additions might be coming. Nosbaum says Itron hopes to expand its products and services further, both through its own research and development and through additional acquisitions.


The LineSoft acquisition was a good one, says Boston-based stock analyst Eric A. Prouty, who follows Itron for the Adams, Harkness & Hill Inc. investment bank.


One of the major assets of Itron is that they have fantastic relationships with the utility industries, Prouty says. The (LineSoft) acquisition allows them to add to their products, yet still concentrate on the utility client base that they know so well.


Prouty currently rates Itron stock as a buy, which falls in line with the consensus rating from analysts who follow Itron. The companys shares are listed on the Nasdaq quotation system, and as of earlier this week, were trading at just over $30 a share, up from about $6 a share two years ago.


Itron was founded in 1977 and in addition to its Spokane headquarters, it has operations in Minnesota, North Carolina, California, France, and England.


The LineSoft operation offers a suite of eight software energy-distribution and transmission products and has regional offices in Georgia, Missouri, Ohio, and Pennsylvania.


In 2001, Itron reported net income of $13.4 million, or 75 cents a diluted share, compared with earnings of $2.2 million, or 18 cents a share, the previous year. The company posted revenues of $225.6 million last year, up 25 percent from 2000.


Itron has said that it expects revenues this year to total between $250 million and $265 million, and that per-share net income will be between 90 cents and 97 cents, not taking into account costs associated with the LineSoft acquisition.


Itron incurred some one-time costs associated with that acquisition that will affect its bottom line this year, Nosbaum says. It has forecasted, however, that the LineSoft operations will boost Itrons revenues by between $16 million and $20 million in the remaining three quarters of the year, and that the acquisition will enhance the companys earnings in years to come.


We looked at LineSoft, and we saw a company that could grow our company in the short term, as well as in the future, Nosbaum says.


Into transition


With the acquisition completed, the task now is to merge LineSofts operations and employees into Itron. That process is in full swing, Nosbaum says. Itron retained all but about 10 of LineSofts 200 employees, giving Itron a total of about 1,300 employees, 475 of whom are in Spokane. Much of the internal transition involves switching employees to Itrons payroll and benefits.


LineSofts 125 or so Spokane-based employees will continue to work at LineSofts offices in the Pinecroft Business Park, less than a mile from Itrons corporate headquarters in the Spokane Valley. Nosbaum says Itron eventually would like to have all of its employees under one roof, and has been working on a master plan for its facilities, which currently are located at 2818 N. Sullivan, in the Spokane Valley. At this point, it doesnt have immediate plans to move the LineSoft operations into Itrons headquarters, although Nosbaum says some former LineSoft employees will move there, and some Itron workers will move to the LineSoft offices in coming months.


Internally, LineSofts operations are now referred to as Itrons Transmission and Distribution Solutions Product Group, though externally, they will retain the LineSoft name for a transition period of at least six months, since the LineSoft name is so well recognized in the power industry, Nosbaum says. As early as the end of this year, however, the LineSoft name will be eased out, and the former LineSoft operation will function fully as part of Itron, he says.


LineSofts Brown has been named Itrons vice president of distribution and transmission strategy, and will both help to oversee the former LineSoft operations and work as a strategic consultant to Nosbaum and Itron President and Chief Operating Officer Rob Neilson.


Neilson is overseeing the LineSoft operating group through the transition and is working at those offices nearly full time, Nosbaum says.


He says the presence of a high-ranking Itron executive at the LineSoft offices during the transition should signify to former LineSoft employees that their new employer views the operation as a key part of the overall company. Also, Neilson, in his expanded role, is able to infuse Itrons values and culture into LineSoft in the most gentle of ways, Nosbaum says.


The two operations, however, already have much in common, he says.


For example, although the LineSoft group makes software and Itron makes electronic devices, both companies sell to utilities. Therefore, while sales teams from both camps are familiarizing themselves with a new group of products, both are selling to industry sectors they already know.


Before the acquisition, employees from one company often left to take positions at the other.


Also, Johnny Humphries, LineSofts chairman at the time of the acquisition, is the former president and CEO of Itron.


The differences primarily involve the companies stages of development, and those differences are what helped make the acquisition possible, Nosbaum says.


Prior to the acquisition, LineSoft operated as what Nosbaum describes as a late-stage startup company that was sprinting to increase its revenues and value in order to position itself to hold an initial public offering. Brown started the company 12 years ago, and it had become a darling of Spokanes high-technology sector.


Brown said threes year ago that he hoped to take LineSoft public in 2001, but he later extended that time line as the stock market spiraled downward and became less receptive to IPOs, especially those for high-technology companies.


Nosbaum says, Fred (Brown) was running out of ground from that standpoint.


Itron began to increase its market value about two years ago as its sales and revenues grew, after financial losses over the previous couple of years. Nosbaum says that about a year and a half ago, he and Neilson began talking about developing an expanded vision for Itron in order to increase value for the companys shareholders and make it more attractive to its customers. It was at that time that the idea of acquiring LineSoft first arose. Itron didnt approach LineSoft about the acquisition until about six months ago.


It makes infinite sense for both groups, Nosbaum says.