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The CN Interview with GlowPoint CEO, David Trachtenberg

14 October, 2004

Conferencing News: So how is 2004 shaping up for GlowPoint? What are the two things you've achieved that you set out to do, and what are two things you haven't yet accomplished?

David Trachtenberg: 2004 has been a milestone for GlowPoint as our first year operating as a fully independent company. As you know, the service was launched nearly 4 years ago, but the company was essentially re-launched at the beginning of January with a new management team, a new suite of service offerings, and a new and focused mission: to make video an integral communications tool, as easy and spontaneous as the telephone with the power of face-to-face communications. We just announced our 20 millionth minute over the network and that our customers are making over 20 thousand IP-video calls per month. Our customers use video more than twice the industry average – and with GlowPoint 's IP-based solution, are using video in ways never imagined, especially with legacy ISDN networks.

Since I joined the company as CEO last October, I have been very clear and consistent as to the two key objectives for the company: "getting back to basics" and diversifying our distribution channels. First, as an independent, publicly traded company, we needed to ensure a credible path to break even. 2004 has been a year of improving our operational efficiencies, and we have made tremendous progress. We have gone from negative gross margins when I joined the company late last year, to over 20% gross margins announced at the end of our second quarter of 2004. And every new customer not only enjoys a flawless customer experience, but also drives much healthier margins for the company. We are also no longer dependent on a sole distribution channel. In fact, our original founding channel, Wire One, now accounts for very few of our new sales. Over the past year, we have announced new partnerships with resellers and distribution partners such as ReView Video, Vemics and a strategic alliance with TANDBERG.

And now it is important for GlowPoint to elevate our brand and IP-based video communications solutions to the market. While GlowPoint is a well-known company and brand in the video industry, it takes time to build broader awareness. We now have the right partners, products and marketing communications team to get it done. Our recent launch of Video Call Director is a case in point of how we are extending our visibility both with our customers and the marketplace. Finally, all video solutions and networks are not created equally, and we as an industry need to pay more than lip service to the customer experience – when our customers are actually making a video call. If the industry is going to see video integrated into customers ' everyday communications like we have seen at GlowPoint, we must rally other companies to our mission.

CN: I (the publisher of CN) bought some shares of GLOW at $1.55 right after your last quarterly conference call. At the time of this writing, they 're at $1.34 after having visited 90 cents. Ouch. What's going on?!

DT: Our customers literally see the value of our services every day. The operational key metrics of the company have improved quarter after quarter since the new management team has come on board. We are here for the long term, with a clear purpose to build shareholder value. Taking a short view of the stock market 's vagaries in technology and microcap segments is not where we are focused.

CN: Gotcha. Now I get it. (Note to self: think about long term investing, beyond a week). ...In your market, customers demand a high Quality of Service and we understand GlowPoint purports to provide that. But as so-called converged networks improve and provide comparable QoS, how will GlowPoint compete, particularly given its network overlay strategy?

DT: We have had over 13 sequential quarters of higher than 99.99% Quality of Service, meeting and/or beating our service level commitment to our customers. We 've supported major live television events such as the NFL and NBA Drafts with interviews carried live over the GlowPoint network. Our customers use GlowPoint and our IP-video communications solution in ways never imagined before. We had one call placed from Boston to a major broadcaster 's New York studio during the Democratic National Convention that lasted 164 hours with no degradation in quality or any interruption of service. We don 't "purport" quality, GlowPoint is synonymous with quality.

While network convergence for data and voice is in place today, adding video to the mix is not as easy as others would like you to think. But we do believe that convergence will happen, just not as fast as the pundits are saying. Regardless, for those customers that want to go to a converged voice, data and video network, GlowPoint has a critical role to play. In fact, we have a number of examples where we have "GlowPoint-enabled" other networks so that our customers could "bring their own access," but still have access to our suite of IP-video services, like "000" Live Video Operators, Direct Dial Video Numbers and now our Video Call Assistant and Video Call Mailbox solutions. So, while traditionally we have been viewed as a network overlay solution, there are many ways to integrate the GlowPoint solution. We know from experience – 20 million minutes worth of experience – that the use of video communications will expand when customers can actually use it as easily and as spontaneously as they do the telephone. A solution is more than transport; it 's about the entire customer experience.

CN: Let's hear how you think you compete from both a technological point of view and on a price-point basis with Masergy, one of your competitors.

DT: Case in point. Masergy has a good, quality network and, like many other companies and carriers, can get a video packet from point A to point B. But giving a customer video transport and having them "go do video" is a recipe for more of the same in the video industry; a poor customer experience that results in frustrated executives who would rather use the phone or travel than to be faced with poor, unstable connections. GlowPoint provides a complete video solution by providing the tools and applications necessary to use video and integrate it into a company 's everyday communications. I would like to see Masergy and others as partners and not competitors. There is no reason why the patent pending solutions we have created are not white labeled or resold in partnership with carriers and network providers. Getting people to use video is the industry 's objective. "GlowPoint-enabling" other networks should be a win-win for GlowPoint, our network partners and ultimately, the customer.

CN: Tell us more about your patents. Are you using and applying all of them? Which of them do you feel the market will come to appreciate increasingly? Do you suspect any of your patents are now infringed upon?
DT: We now have seven pending patents ranging from real-time billing capabilities for video communications, direct connection to GlowPoint Video Operators just by dialing "000" from any GlowPoint location, to our latest release, Video Call Director. We are using all of our patents and know that the applications they protect are a major reason why our customers choose GlowPoint initially and expand with us as they see the benefits of a video solution. In fact, we just announced that one of the divisions of the U.S. Department of Justice 's expanded its number of GlowPoint locations. We have no reason to believe that any of our patents are being infringed upon because no one else has brought the same product capabilities to market.

CN: What's in store next year at GlowPoint? Tell us something exciting about plans for 2005

DT: We are going to continue executing against our mission by delivering unique and exclusive features to our customers so that the market continues to integrate video into their everyday communications. We will continue to lead the market in technology innovations, customer experience and increased partnerships between GlowPoint and others to expand the availability of these exclusive tools.

CN: Thanks, David. Good luck with GlowPoint.


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