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Vintage Switches.

Link America's Andre Ruzo finds a burgeoning market in used telephone equipment.

GABRIEL GARCIA MARQUEZ MAY HAVE WRITTEN LOVE IN THE Time of Cholera, but if Andre Ruzo had penned it, it would have been titled, "Losing Your Business in the Time of Cholera:"

In the early 1990s, the Peru native had his own Houston-based import/export business called Simpar Foods, which brought in asparagus and mangos from Peru in the wintertime and sold them to food distributors and supermarkets in the United States, Canada and Europe. But when a cholera outbreak hit his home country, he was suddenly left without any customers.

So in early 1994, Ruzo moved to Dallas to work for ICBS, a company that repairs telephone equipment. Many of the big telephone companies were upgrading and didn't know what to do with their old switches. After a year, Ruzo left ICBS to start a company that would buy used equipment from big telephone companies and sell it to smaller telephone outfits.

Ruzo never went back to the fruit-and-veggie business. The 38-year-old has since built his company, Link America, into one of the largest telecom refurbishers in the United States. Sales at the company, which is based in the north Dallas town of Rowlett, have mushroomed from US$500,000 in 1995, his first full year in business, to $4.5 million in 1999. He expects that figure to reach $15 million this year and $20 million next year.

A higher purpose. Ruzo is typical of many Latin Americans who come to the United States, eager to become entrepreneurs and make their fortune. But Ruzo says he has a higher purpose: to build an enterprise that gives other Hispanics jobs and a chance at building their own wealth. Indeed, about half of his 55-member work force is originally from Latin America, including Mexico, Puerto Rico, Brazil, Venezuela, Costa Rica and Nicaragua. He has set up an employee stock ownership plan in which his workers own 3% of the company--with the potential to own 10%. "I'm not in it just for the money," he says. "I have a higher purpose: I build to share."

Ruzo comes from a long line of entrepreneurs: His great-grandfather, whose portrait hangs behind his desk, was a textile manufacturer in Cuzco; his mother, Teresa O'Campo, is considered the Julia Child of Peru. Ruzo came to the United States as a student in the late 1970s to escape political violence in Peru. He graduated with an industrial engineering degree from Texas A&M University in 1983, then floated around, from an oil company doing exploration work in Honduras to an engineering firm to his fruit business (he also sold real estate on the side) to ICBS. "But I always wanted to be an entrepreneur," he says. "I was looking for a large-ticket item, repetitive sales and limited competition."

Off and running. When he started Link America, Ruzo had a wife and three kids, a fourth on the way and only six months' worth of living expenses. But he was convinced he had found an untapped market in used telephone equipment. He set up his business in a spare bedroom in his house and hit the phones, buying up old, cabinet-sized telephone switches from around the country, storing them all over his house. After the first four months, Ruzo had brought in sales of only $600. But in the fifth month, he sold a $65,000 switch upgrade to GTE, ending up with a $30,000 profit.

That deal got Ruzo off and running. Nine months later, he bought a 10,000-square-foot warehouse in Rowlett, setting up a test laboratory inside. The business grew so quickly that a year and a half later, he purchased a 20,000-square-foot warehouse down the street to store all his equipment. In 1998, he bought two acres on which he plans to build a new 35,000-square-foot headquarters.

Used telephone switches now make up a quarter of Ruzo's business. Link America buys old GTE, Siemens and Lucent Technologies switches from larger telephone companies that are upgrading, tests them at his warehouse, makes any necessary repairs and then sells them to smaller telephone companies looking to save some money. The cost savings to the smaller company is significant: A new switch can cost as much as $1.2 million, a refurbished one can cost as little as $500,000.

The bigger part of Ruzo's sales--40%--is in used processor cards, which handle all the data that move through a switch. New cards can cost $15,000 and take six weeks to deliver. Ruzo sells his at around $3,000 each and can often deliver them overnight. "We ship hundreds of boards every day," he says.

When he can, Ruzo likes to take equipment on consignment so his cash flow isn't tied up in equipment (consignments currently make up at least 15% of his business). His company also sells transmission equipment, repairs and installs equipment, custom-builds cables and modifies line cards that plug into switches to provide such special features as caller ID.

Ruzo's products and services have attracted customers across the United States, from Grande River Communications Inc. (GRCI) in Raymondville, Texas, to NextLink in Bellevue, Washington, to Midwest Telephone Service, in McPherson, Kansas, to Primus Telecommunications, in McLean, Virginia. According to Grande River, the reason it bought a switch from Link America for its new long-distance service to Mexico was low cost--65% less than a new unit--and fast installation--just three weeks.

Switching south. Ruzo also has big telephone companies such as GTE, Siemens and Lucent Technologies on his customer list. GTE even gave Link America its "Nuggets of Gold Award" in 1997 for outstanding performance. "It's typically the company that telecommunications giants like AT&T and GTE will always look for," says James H. Richardson Gonzolez, director of supplier diversity at GTE Service Corp. "Not only is Andre very service oriented, but very high quality. And in our business, which is so competitive, we sometimes have very negative experiences with some [vendors]."

Ruzo also sells southward. He's already sold circuit boards and transmission equipment to Telefonica in Argentina and Peru and Telefonos de Mexico. "With deregulation and demonopolization of the area, I see my products and services working with small guys that want to start phone companies. That's the 'Link' of the 'Americas,"' he says, an obvious reference to his company's name.

Ruzo now competes against at least five other telecom refurbishers, including his old boss, Tom Lacey, at ICBS, which claims to outdo Link America with at least $12 million in sales. "He never thought I could make it happen." Ruzo says. "He underestimated me."

Ruzo has had his stumbles along the way. A few years ago, he joined the dot-com craze by buying a 40% stake in an Internet service provider called the Americas Exchange that targeted Hispanics in the United States. He eventually sold it back to his Mexican partners at a $500,000 loss. "It took so much of my time and money, it began hurting my sales," he says.

Now that he has his focus back, Ruzo is in an expansion mode. He's currently looking into getting into assembly and even manufacturing parts. He's seeking outside investors to help him make it happen. "Someday switches are going to become obsolete," he says. "So we have to prepare for the future."

Once he gets the company to the $20 million level, Ruzo plans to step out of it--either selling it, merging it with another company or handing over the reins to someone else. His goal is to eventually work with children; he's already done some with an orphanage in Peru. "I'd like to teach them how to fish, rather than giving them the fish," he says. Not much different from what he's accomplished at Link America.
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Title Annotation:Andre Ruzo of Link America
Comment:Vintage Switches.(Andre Ruzo of Link America)
Publication:Latin Trade
Geographic Code:1USA
Date:Apr 1, 2000
Previous Article:Crossing the Atlantic.
Next Article:Jungle Love.

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