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Date: Tue, 17 Nov 92 12:53:40 EST
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11/17/92


TITLE #m#gm#m##m#sw#m#InterVoice's Daniel Hammond: Moving Beyond
Initial Success - And First Big Setback Sean Silverthorne In
Mountain View, Calif.  When InterVoice Inc. co-founder and Chief
Executive Daniel Hammond hit 40 this year, he decided it was time
to pound his body into shape.

Hammond didn't do it in a small way: His weight trainer holds the
Mr. America body-building title.  So it is no surprise that Ham-
mond was ready for action when his Dallas-based company, which
makes automated phone systems for banks, insurance companies and
other phone-intensive businesses, flattened out in 1990 after six
years of solid growth. There were too many customer complaints,
too many missed opportunities for new business, Hammond believed.

Analysts say there also appeared to be division between the
company's troika management team: Hammond; co-founder and Chair-
man Michael hammond

Tessarowicz; and President Allen Fleener.  "I started realizing
that I was going to have to do something," said Hammond. "My per-
ception at the time was that if we didn't change, sales would
stay flat at around $20 million." But the medicine - a total
remake of the company's products, addition of seasoned managers
and a top-to-bottom rebuilding of marketing and sales - was too
much, too fast. Morale plummeted, and in 1991, Tessarowicz left
the company and Fleener announced his retirement.

"When you have product problems, it permeates the organization,"
Hammond said. "The sales guys get depressed, the field service
guys get discouraged, and besides, the costs associated with
dealing with product problems are horrendous." Today, the gloom
has lifted at InterVoice and the transition blues are a thing of
the past.  Earnings growth registered in the triple and quadruple
digits in the last three quarters compared with marginal year-
earlier profits. Sales in those quarters grew 103%, 88% and 76%
from the comparable quarters last year.  "The earnings are a re-
flection that


Hammond Gets InterVoice Moving Again

when this company is run right, and when the product is stable
and things are as they should be, it is very profitable," said
Hammond.  In the fiscal second quarter ended Aug. 31, InterVoice
posted per-share earnings of 22 cents vs. one cent a year ear-
lier, adjusted for a recent 2-for- 1 stock split. Sales advanced
76% to $10.9 million.  In fiscal 1992, which ended Feb. 29, In-
terVoice earned $2.9 million, or a split-adjusted 33 cents a
share, down 8% from the year before. Earnings growth was checked
by accelerated spending on R&D and marketing, but revenue grew
48% to $30.2 million.

Solidifying No. 1 Position

Company watchers credit the improvement to Hammond, an engineer
by training, and his decision to surround himself with seasoned
managers.  "In the old days, they had three people running the
company. Two of those people are essentially gone," observed
analyst Steven Levy of Hambrecht & Quist Inc. "Dan has really
solidified his position as the No. 1 guy." While Hammond concen-
trates on the big picture and product development issues,
President and Chief Operating Officer David Brandenburg, who
joined the company in July 1990, runs day-to-day operations.
Also, Mike Barker was lured in 1991 from competitor DSC Communi-
cations Corp. to serve as senior vice president of sales and
marketing.  "If you are secure enough in yourself to realize that
you aren't the smartest guy in the world in everything, then I
think that's half the battle," Hammond said.  Hammond, who had
worked as an engineer in the semiconductor and personal computer
industries, joined with Tessarowicz in 1983 to start InterVoice,
then called Interactive Technologies. Their first product, sold
to Southland Corp.'s 7-Eleven unit, was an automated check verif-
ication system.

"We put (an initial) system together in November 1983, and by De-
cember it had paid for itself," Hammond said. "The next year (7-
Eleven) rolled them out in 38 cities." InterVoice was on the map.
Analysts say InterVoice later benefited from being early to mark-
et with personal computer-based phone automation systems that
were affordable, easy to use and able to be customized. Revenue
rocketed from $1.2 million in fiscal 1986 to $26 million in fis-
cal 1990.  That's when the company hit a wall.  "Any company that
goes beyond $25 million in sales . . . needs more organizational
skills, more operating skills," said Alex Cena, an analyst at
Shearson Lehman Brothers Inc. "You no longer are just running by
the seat of your pants. They needed to bring somebody on who had
(those skills)."


Tough Transition

On the product side, InterVoice moved its computer- based pro-
ducts to a new operating system, International Business Machine
Corp.'s OS/2. The decision was almost a no-brainer: The software
allows InterVoice products many more capabilities and is a good
architecture for future development.  But Hammond admits to fum-
bling the change by trying to do too much at once. In-house pro-
grammers had to learn a whole new development system while con-
tinuing to update products for existing customers under the old
software.  "In retrospect, what I would have done is stage the
transition instead of converting everything at once," Hammond
said.  Almost simultaneously, InterVoice was adapting a new cor-
porate structure, a more structured way of running the business.
A strategic plan was written with a mission statement and meas-
urement tools to make sure goals were being achieved.  "The ac-
tion plans all have measurements associated with them," Hammond
said. "For example, the (quality assurance) group measures how
many software bugs come out of R&D. We're identifying which
software engineers generate the most bugs, then raising their
awareness of it." "That's part of what we've done in the maturing
process here. We've gotten a lot more attuned to these kinds of
details." A major area of change was sales and marketing.  "We
just had to broaden our channels of distribution," Hammond said.
"We needed more guys on the street, we needed better management
control for the sales and marketing process." The endless variety
of challenges is what he likes best about being a manager, Ham-
mond adds.

"The nature of running a company is change. Conditions are never
the same as they were three months ago. That can be scary, but it
also is what makes it fun for me to come to work every day."

Learning Hands-Off

As part of those changes, Hammond has had to become less of a
hands-on manager, especially in the area of engineering.  "I
designed the company's first product," he recalled. "I got a lot
of satisfaction doing that, but I can't do that anymore. I have
to leverage all my thinking through the development team. That
was a big change for me." The voice response market is small,
about $400 million in yearly sales, but it is growing 40% annual-
ly, according to analyst Cena. InterVoice is the clear market
leader, but it has only 9% or 10% of the highly fragmented mark-
et.  "They've probably got the best product out there," said
Cena. "Right now, I think they have the market virtually to them-
selves, as far as big companies are concerned."

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