Clear signal for progress and profit

A British high-tech company puts its success in the mobile phone market down to being able to respond to changes in consumer demand

The mobile phone market is not everybody's idea of the place to be at the moment. But a small British-based company seems to have found a fruitful opportunity at a time when the formerly thriving industry is characterised by drastic cutbacks and continuing fall-out from the bursting of the technology bubble and the high prices paid for 3G licences.

Surrey-based 4Cyte, which in just over three years has established itself as a leading force in specialist plastics decoration, has survived this tumultuous period largely through being flexible and adaptable.

When Lionel Hoare and his cousin, Peter Herring, started operations in early 1999, there was a clear market for personalised mobile phone covers, as Nokia and other handset suppliers set about moving the phones ever further away from their utilitarian origins and towards true fashion accessories. Then came the downturn and suddenly the prospects did not look so bright.

Inevitably, the business has not developed as anticipated, but they are expecting turnover to increase from the current £2m to £5m in the next financial year. With a substantial part of that coming from exports to markets as far afield as China and the United States, this growth can be attributed to watching developments in the market and being prepared to respond to them. "As a small start-up company, we're amazed that we're exporting around the world," says Hoare.

Having said that, 43-year-old Hoare comes across with all the confidence you would expect of a man who is from a well-known banking family and until 1998 worked in the City of London, selling gilts before moving into fund management.

"I was casting around for something to do," he says, explaining how Herring introduced him to the work he and his colleagues were doing in the area of painting technology. To start with, Hoare says, the idea was that he would provide the funding Herring needed. But he grew so enthusiastic that he joined the company as chief executive when it was established in January 1999, leaving Herring to concentrate on the development as technical director.

Having "extracted" the team Herring wanted from a mass production painting operation in Walton-on-Thames, the business began trading properly in April of that year and in December moved to its present home in the low-slung, high-tech building in Ockham that was previously inhabited by the Tyrrell Formula One racing team.

As a small research and development operation employing only half a dozen people, 4Cyte – chosen as a name because "it's a pun on just about everything", says Hoare – was too small for the Tyrrell building on its own, so it has sublet part of the premises to C and L Engineering, a firm that has seen its expertise in lasers used in rock concerts and has also made robots for Star Wars films. C and L now does what engineering work 4Cyte requires and the two businesses "happily co-exist in the building".

Not only is Hoare new to the technology, he is new to manufacturing, a sector that is not always on the best of terms with his old world of the City. Though the irony does not seem to be lost on him, he only says: "Manufacturing is quite different from the City. They don't usually understand each other – they operate at a different pace and the disciplines are very different."

Having left his old milieu behind, Hoare is clearly excited by the progress the company has made in boosting its sales at a tough time for much of industry. The bulk of these sales come from the company's automated decorating machine. Known as the Specialised Precision Image Decorating Apparatus, or SPIDA, it enables operators to combine other functions, such as etching and laser printing, as well as painting without having to handle the components and so risking damaging them.

It is also a comparatively small piece of equipment and, at a cost of £600,000-£700,000 each, competitively priced against conventional robotic equipment, and because it is modular it can be extended or reduced in size quickly to accommodate changing production requirements. Moreover, it does not require extensive training for operators.

Hoare points out that this is particularly important at a time when cost pressures are leading the manufacturers that make mobile phone covers for companies, such as Nokia and Sony Ericsson, to consolidate. Because the SPIDA is so easy to use, it enables the moulding and painting of the component to be done by a single company under one roof. In the past, moulding companies outsourced the painting to other operators, with resulting increases in costs and loss of control over the final quality.

With SPIDAs already installed in China and Texas in the United States, 4Cyte is attracting interest from other parts of the world, including eastern Europe, a growing centre for mobile phone production, alongside China and Latin America.

Hoare admits that the troubles of the mobile phone market, where the number of phones produced each year around the world remains static at the admittedly still substantial figure of 400 million, have cost his company orders. But he believes that consumers' lack of interest in new technological developments, such as WAP-enabled phones, could bode well for 4Cyte. Companies are "realising they have got to do something about getting business", he says, adding that doing more to change the appearance of the handsets is one way they can attract extra sales.

However, predicting the looks that customers will want is as difficult in the mobile phone business as it is elsewhere. And although the SPIDA, while capable of painting 1,800 phones an hour, has the flexibility to change its configuration simply and quickly, it is being located in manufacturing centres that are becoming concentrated long distances from the leading consumer markets.

Hoare hopes that their other product, MiCyte, will help deal with this problem. This is a process developed with ICI Imagedata, which has been a pioneer in the development of the trademarked printing technology Dye Diffusion Thermal Transfer (D2T2), that enables personalised colour images to be embedded on mobile phone fascias. The D2T2 technology is typically used in passport photographs and ID cards, but the MiCyte process introduces special coatings that "embed" the surface and mean that the image is not rubbed off despite heavy use.

The machinery that produces the image is only the size of a personal computer, so it can be installed in mobile phone shops and other locations for on-the-spot customisation. The system is already available in certain mobile phone retailers and via the MiCyte.co.uk website. But Hoare has plans to make it more widely available in shopping centres and elsewhere in the run-up to Christmas.

Having reached the point where they claim to be heading for profitability, Hoare and Herring are not inclined to rely on the mobile phone business. The MiCyte process is already being applied to hairbrushes – again with an eye on the Christmas market – and the two men are optimistic of attracting significant interest from the motor industry.

Having done a one-off "violent pink" interior for a Jaguar, the company is already working with Aston Martin on special effects for dashboards and is hoping to pick up extra work from other parts of the Ford empire.

Nor is there any reason to stop there. The technology's ability to create a fake wood effect that is barely distinguishable from the real thing even when viewed closely makes it highly attractive to the marine industry, where wood and water do not always make good bedfellows.

But, while 4Cyte is keen to break into new markets, it is not intent on getting much bigger. "Our ambition is to be at the cutting edge of technology," Hoare says, adding that, while it is always on the look-out to launch new products, it does not want to get involved in production or other aspects of the business that require significant investment. Instead, it is happy to enter arrangements with other parties to manufacture and market its products in return for royalty payments.

On top of Hoare's original investment, the company received about £500,000 in funding 18 months ago from a loose group of Scottish-based individual investors, or angels, called Braveheart Ventures. Hoare is now looking for fresh funding in the coming months. But this time he plans to fund the different sides of the business separately, so that they can develop at their own rates, though there will be a single research and development "core" serving them.

Such a strategy is dependent upon protecting the technology, and Hoare spends a good deal of time and effort with patent lawyers protecting "everything we can protect". But he adds: "The best protection is to stay ahead of the game."