Norman E. Gaut

By Reynes, Roberta | Chief Executive (U.S.), July/August 1995 | Go to article overview
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Norman E. Gaut

Reynes, Roberta, Chief Executive (U.S.)

Can Norm Gaut keep up the high-wire act?

Since taking over as president and CEO of Dancers, MA-based PictureTel in 1985, he has catapulted his company to the forefront of the hot corporate videoconferencing market. PictureTel revenues jumped 45 percent last year to $255.2 million, and the company's stock price nearly quadrupled in the last 12 months, recently trading around $44 a share. But new, desktop products pit the company head-to-head against such larger competitors as AT&T and Intel. What's more, its fortunes are tied to fast-breaking changes in other volatile markets, such as high-speed chips, computers, and telephony.

PictureTel manufactures both large systems for group conferencing and desktop systems that run on personal computers. Its customers include Oracle, Viacom International, and Laura Ashley. Gaut, 57, sees the biggest future in desktop, which offers a multimedia wrinkle: data sharing. Users can work on documents simultaneously while viewing one another in a window onscreen.

PictureTel unveiled a $2,500 desktop product in January, the result of $20 million it pumped into R&D over the last two years. But the cutting-edge venture came at a price: Net income slipped from $7.4 million in 1993 to $4.6 million last year.

Despite the slide, Gaut says, the project was a prudent investment: He predicts videoconferencing will be on every corporate PC in less than five years. Analysts are optimistic about growth in the desktop market, especially as system price tags come down (one analyst says the average cost of a PC-based system will drop to $700 in 1996 from its current $3,000), but are divided about its pace.

"Most of the Fortune 500 are going to be using it in five years," says Randy Yuen, an analyst with Oppenheimer & Co., a brokerage firm in New York. "Desktop will be a billion-dollar industry."

But Robert Mirani, a senior analyst with the Boston-based consulting firm, Yankee Group, cautions: "We think desktop will take four to five years to go beyond 1 percent to 2 percent."

With PCs, PictureTel enters a potentially much larger market with bigger competition, a sharper learning curve, and higher stakes. It's also uncharted territory for Gaut: While he co-founded and ran a computer-related, $41 million environmental consulting firm prior to joining PictureTel, this is his first experience with a big-product company, and he freely admits to "learning as I go along."

Yuen of Oppenheimer offers a vote of confidence: "Gaut's strength is being able to focus on the entire picture, rather than individual products, as some others have done," the analyst says.

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