Robert Pera Quit Apple And Became a Billionaire

Image: Cody Pickens for Forbes

ON CLOUD 9 Pera’s long-distance antennas sell for a fraction of what the competition charges

Robert J. Pera lives lean. The Apple engineer turned entrepreneur never checks a bag at the airport, leases a BMW and keeps a sparsely furnished one-bedroom apartment in San Jose, California, Pera takes a similar stripped- down approach toward running Ubiquiti Networks, the maker of wireless-networking  gear he founded in 2005 and that went public in October. “My aim is to build something great as efficiently as possible,” he says.

Thus far Pera has had exceptional aim: In the 12 months ended September 30, Ubiquiti netted $64 million  on $243 million  in sales. That 26 percent net margin is the highest of any publicly traded computer hardware firm, according to FactSet Research Systems. Pera owns 64 percent of Ubiquiti, making his stake worth $1.2 billion on paper.

How do you clock fat margins in a commodity-like manufacturing business? Outsource the sales function. In Pera’s view, star salespeople have their own interests at heart, not their employer’s. Ubiquiti instead leans on some 50 distributors  and hundreds of smaller resellers around the world. That’s right: Pera carries no direct sales force and he operates globally. Nearly 70 percent of Ubiquiti’s top line comes from developing countries like Brazil, Indonesia and the Czech Republic.

What the distributors  can’t gin up, the Web can. To connect with customers, Pera launched an online forum where they can interact with his research and development crew. The forum now has 110,000 registered users. “They tell our R&D team what we need to improve on,” says Pera. Monitored by two or three engineers at any one time, the forum essentially takes the place of a customer support desk.

Ubiquiti makes systems that provide Internet access for as few as ten people within a 9-mile radius, to 10,000 customers (or more) within a 36-mile radius. The entire product line is relatively cheap. Motorola’s former Canopy unit (now called Cambium Networks) charges $2 million  to $4 million for a system with 10,000 subscribers; Ubiquiti’s equivalent system goes for $1.65 million. Ubiquity’s ten-subscriber unit, for $800, is only slightly less expensive than its nearest competitor.

Boyish-looking and lanky, Pera is the rare Silicon Valley star to grow up there, too, in nearby San Carlos. His mom worked in public relations, his dad in business consulting. Pera missed a year of high school because of a rare heart-valve infection, but he eventually bagged undergraduate degrees in electrical engineering and Japanese, as well as a master’s in electrical engineering, from UC San Diego, where he specialised in circuit design. After graduation, he got a job with Apple as a hardware engineer working on the Airport  Wi-Fi base station.

Says Pera: “Apple’s a great company, but I realised I wanted to have more success faster.”

He saw his chance in bringing the Internet to emerging markets. Some entrepreneurial service providers were harnessing Wi-Fi technology by putting amplifiers and antennas in front of Wi-Fi ‘radios’ within specialised computers (not PCs or laptops) to boost their range. Hobbyists from rural Montana to the Czech Republic were charging $1,000 for the amplifier/radio combo. Pera figured he could make a cheaper all-in-one version. In March 2005, he spent $30,000 to build a prototype in his apartment and set up a Web site. When a $240,000 upfront payment for 3,000 units came in, Pera flew to Taiwan and found a contract manufacturer to handle the load.

At $82 apiece to distributors, the devices were an instant hit, attracting competitors. Within six months, larger copycats were making similar gadgets for $30. “I learned my first rule of business,” says Pera. “You need to build something defensible.” Rather than make one piece of a wireless system, Pera decided to make the whole thing. By 2009, he was selling a stand-alone system that delivered wireless Internet access complete with antennas, base stations and other gear, all running on proprietary software. Competing hardware doesn’t work with Ubiquiti’s software. It’s a strategy right out of Apple’s playbook: Think iPhone, not Android.

Pera says he is using the $33.5 million  raised in the IPO to further expand his product line, though he won’t share many details. In October, Ubiquiti began selling $60 video surveillance cameras that send footage over the Web, helpful for keeping an eye on warehouses, hotels and schools; Pera throws in the viewing and analysis software for free. While Pera says he bats away “99 percent” of the new distributor applications that come in daily, rogues still slip through. In early 2011, a Chinese distributor stole designs for some of Ubiquiti’s AirMax wireless radios and built a factory in Shenzhen to make counterfeit versions bearing the Ubiquiti brand. With the help of lawyers in China and the Shenzhen police, Pera shut down the fraudster and sent him to prison—but not before shelling out an undisclosed but ‘significant’ sum.

Pera’s master plan? “I want to be in the same sentence as Cisco or Huawei,” he says rather matter-of-factly. “We have the potential to be a big-cap defining company.” Spoken like a brand-new billionaire.