BTG focuses on engineering
- By Margret Johnston
- Mar 01, 1998
BTG Inc. president and chief executive officer Edward H. Bersoff does not feel the need to rewrite the script on how to run his company after deciding to leave the product reseller business last December.
In Bersoff's mind, BTG is returning to its core business. Speaking at his company's Fairfax, Va., headquarters one week after completing the transfer of the business to Government Technology Services Inc., Chantilly, Va., Bersoff said the company is settling back into a familiar role in the government technology sector.
''I want to emphasize that what remains of BTG is a systems engineering and systems integration company," he said. "There are 1,400 employees working on government contracts who are committed to the customer in solving problems, and that won't change."
But Bersoff admitted that the energy BTG expended on the reseller business, which it entered in 1992, "unfortunately cost us dearly in many ways," and the company has been forced to send out a new message that it is not a "box shop," he said.
Bersoff stressed, though, that BTG never stopped doing engineering services, which he defined as "the providing of talented people to solve problems." Sometimes that is in the form of a report, sometimes it is a software product, and sometimes it is providing a system that has hardware and software components, he said.
Bob Guerra, president of Robert J. Guerra and Associates and a consultant to GTSI, praised Bersoff's move to sell the reseller business and said BTG has the necessary infrastructure in place to continue on a sucessful course.
''They have historically been one of the best in the market in delivering engineering services," Guerra said. "They can now focus on one of their core competencies in which they have always been highly regarded." Bersoff said he was dismayed that most reports about the surprising sale— which was announced in December— failed to mention that BTG still has 1,400 employees and a 16-year history in the engineering and systems integration business.
He also predicted that even after losing 320 employees and suffering losses over several quarters, BTG will be profitable next fiscal year. Acquisitions appear to be off BTG's agenda for now. The day after signing the definitive agreement with GTSI, BTG cancelled a purchase that had been pending since last summer to buy Micro-To-Mainframes Inc., a commercial systems integrator, for $25 million.
The company paid MTM $500,000 to terminate the deal, saying it wanted to avoid distractions from its core business.
Bersoff said BTG will have to prove itself to the market before going shopping again. Last week BTG stock was trading at about $9 per share, down from a 52-week high of more than $22 per share.
''It is going to take us a while to convince the investment community we are in a position to make money," he said.
Bersoff's decision to sell the product business came after he worked the numbers and discovered that BTG was making at best only $3 on every $1,000 worth of investment.
"The real story here is what's going on in the federal reseller market. I wish I had seen this trend a little earlier. There is no room for error," he said, adding that he had no objection to the government turning the screws, "but the price of that is being paid by the small companies.
''There are some companies— Dell Computer Corp. and Compaq Computer Corp., for example— that will be able to make up for the thin margins in volume," Bersoff said. "But it has to be huge."
Bersoff said the result of procurement reform is that the government desktop is as modern as any out there, but he said that under the current climate, "The only game in town is to get your cost of sales and cost of delivery to the lowet point."
However, while BTG may be profitable soon, some industry observers believe BTG, at its present size, may be an attractive acquisition target for larger vendors.
Bersoff said he is flattered BTG has been rumored as a possible takeover target, but the company is not for sale— mainly because it would be too expensive. Bersoff, who owns about 15 percent of the company, explained that the price paid for most of the engineering companies bought in recent months has been based on their annual revenue.
BTG's revenue from engineering is about $200 million, while its stock price makes it worth only about $90 million. "The suitors who would pay a price we find acceptable are few and far between," Bersoff said.