Utilx Corp. -- Utility Experts Strive To Establish New Corporate Identity

Utilx Corp.

-- Headquarters: Kent

-- Employees: 438

-- Business: Underground utility services

-- President: John Potter

-- Fiscal 1991 revenue: $47.3 million

-- Fiscal 1991 net income: $5.36 million

-- Competitors: Wilson Construction Co., Straightline Manufacturing Inc., The Charles Machine Works Inc., Underground Technologies

-- Major customers: Virginia Power and Electric Co., Bell Atlantic, Commonwealth Edison, GTE, Jersey Central Power & Light

-- Strategy: To change the company name from FlowMole to Utilx to reflect broader underground utility services and company growth and to distance itself from Flow International.

Burrowing under city streets, laying half a mile of electric cables in a single day - it's a worm, it's a mole, no - it's . . . Utilx Corp.

But that's not all this Kent-based company does, which is why it is no longer called FlowMole Corp. The company underwent an identity change in April - inspired by the acquisition of additional underground utility services and a desire to separate itself from the troubled image of its sister company, Flow International.

"The driving force for the name change is our expanding business," said Richard Brinton, vice president of marketing and business development. "A benefit was emphasizing that we're not part of Flow International."

Flow International has been plagued with management problems, including the resignations of its six-man operating team in 1990 and Michael Pao, its president and founder, in May. Its operation uses similar high-pressure waterjets for such things as cutting disposable baby diapers and fiberglass.

The two companies were spun off from the same parent organization, Flow Industries - a fluid-dynamics research company founded in the early 1970s by Pao, a former scientist at Boeing Scientific Research Laboratories.

But that's where the relationship ends.

"There was never a connection between FlowMole and Flow International," said Brinton.

"We want our own identity, earned on our own merit," he said. Brinton initiated the name change, and estimated it will take about three years for people to stop referring to Utilx as FlowMole.

"For the first five years of business, we really were only a FlowMole company," Brinton said.

But the corporation has expanded since then. Utilx soon will be offering three services to utility companies:

-- Installing underground cables and pipes: The registered FlowMole trademark is still used to represent the guided, high-pressure fluid-jet drills that burrow underneath streets and sidewalks, eliminating the need for digging a trench, tearing up the pavement and disturbing traffic. The cable or pipe - at the other end of the drill path - is attached to the drill head and pulled back through the tunnel.

-- Restoring and sealing underground utility vaults and manholes: In April 1990, the company purchased the Revalt service from Utilitech Inc. Revalt has been especially popular in swampy areas such as Miami Beach, Fla., where manholes fill up with water, sewage and dangerous gases.

-- Restoring cable casings: By summer's end, Utilx will become the exclusive licensee of Dow Corning's CableCure system. Failing underground electric cables - often the cause of repeated power outages - are restored by injecting a silicone fluid through the cables' protective plastic casing, filling microscopic voids - the damage caused by moisture.

"There's a tremendous market . . . for upgrading and improving the quality of electric and telecommunications systems," said Utilx President John Potter.

Most underground utility cables were laid in the 1960s and, now, "a tremendous amount of (cables) are failing," Brinton said, which is one of the reasons for the steady increases in demand for Utilx's services.

According to the 1991 annual report, FlowMole installed 161 miles of cable for 13 customers in North America in 1987; last year, 593 miles were installed for 183 customers. The publicly traded company reported $47.3 million in revenue for the 1991 fiscal year, up from $41 million in 1990. Revenue was only $12.8 million in 1987. Earnings per share hit a low of 16 cents in 1989, but were 72 cents in 1991.

"Our strategic intent is to add new products as we identify them," said Brinton.

For instance, Utilx's relationship with Dow Corning could lead to an outlet for Dow's products into the marketplace, he said, especially since Dow is a "product company" while Utilx "is not in the product business, we're in the service business."

Utilx has little competition in its field, mainly because of its proprietary technology - "patents and, in addition, some trade secrets and some know-how . . . that provide a competitive advantage over normal contractors," said Potter. For example, the FlowMole system has 13 U.S. patents and four patents in Europe.

Utilx's competitors are mainly underground contractors who dig trenches and use backhoes, said Potter. But that situation is changing as more construction contractors enter the underground-boring market, although their equipment isn't as successful in rocky ground.

Underground Technologies in San Francisco, Calif., makes and sells a competitive guided boring system, but "we're not really in direct competition" with Utilx's FlowMole, said President Frank Kainnan.

"Our system is more mechanical cutting than jet-assisted," Kainnan said, "while theirs is pure (fluid) jet.

"FlowMole was getting to be a Kleenex-type word in that industry," he said. "It's difficult to play catch-up with them; they're very established."

Wilson Construction Co. in Woodinville is the only local company that uses Underground Technologies boring equipment. Monte Szendre, Wilson's operations manager, said the companies are not known for having head-to-head competition for bids.

In conjunction with its new name, Utilx changed its NASDAQ symbol from MOLE to UTLX and moved to a new building - just down the street from the original FlowMole offices, which were next door to Flow International.

Utilx corporate headquarters house 70 employees in the administrative, accounting, engineering, manufacturing and research and development departments. Most of its sales and services are to customers in the Midwest, East and Europe.

Brinton said the officers started talking about changing the company name about three years ago, but they didn't act on their discussions until FlowMole Corp. acquired the Revalt service.

Potter said the name had to be "low key . . . straightforward and something we can build on." It also had to be appealing to the investment community, with a high-tech orientation.

"We wanted to communicate that we're more than just FlowMole," said Potter. "We wanted to communicate to investors that our mission is broader than the first service we offered."

"We interviewed each senior manager individually to make sure the criteria were true," said Brinton. Then they started brainstorming, with the help of a Latin-root dictionary and their public- and investor-relations companies. Later, they called in a graphic-design company for the new logo. Employee input was not specifically sought out, although their ideas were discussed."

With about 70 suggestions, some were easy to reject, such as Hoses R Us and Galactic Utilities. But when the final names were chosen, they had to first be approved by the board of directors and then go through a legal screening process to make sure no other companies were using the exact name or a phonetically identical version.

"Entelec" was the first choice for a new name, but another company was already using it, said Brinton. They also considered "Enterra," a made-up word meant to signify "in the earth."

The company finally settled on Utilx - standing for "experts in utility renovation," said Potter. The fact that the name doesn't "have a lot of embodied image to it" is part of its charm: "It's a generic descriptor of a utility-oriented company," he said.