BTG and GTSI one year later

BTG Inc. and Government Technology Services Inc. have signed agreements that reduce BTG's ownership in GTSI and transfer the responsibility of government contracts fully to GTSI, including warranty service responsibility.

The agreements also call for BTG to transfer $800,000 in cash and 200,000 shares of GTSI to the Fairfax, Va.-based company and to sell back 400,000 shares of GTSI at $5 a share. BTG also granted GTSI an option to buy the remaining 1.3 million shares of GTSI stock that it owns—13.3 percent of the company—at $5.25 per share.

The BTG sale of its reseller division to GTSI, completed in February 1998, left BTG with a 30 percent stake in GTSI. Since then, BTG has shifted its focus almost entirely to services and has decided to sell most of its stake in GTSI, a BTG spokeswoman said. BTG also has put its Pentagon retail store, where it demonstrated products, up for sale.

The announcement of the agreements was accompanied by the resignation of BTG president and chief executive officer Ed Bersoff from GTSI's board of directors. Bersoff's departure was not a surprise, said William Loomis, an analyst at Legg Mason Inc.

A year after the sale, there is little overlap in BTG's and GTSI's business models, Loomis said, and Bersoff's decision to leave the board will help to clarify to BTG's investors that the company is committed to getting out of the reseller business.

BTG will record a one-time after-tax charge of $1.6 million as a result of the agreements. BTG expects the charge to be offset by a gain in the fourth quarter from the sale of 41,000 shares of Cisco Systems Inc. In other fallout last week from the BTG-GTSI deal:

Former BTG executive Steve Baldwin was elected president and chief executive officer of Intellisys Technology Corp., where he joins four other executives who left BTG last year.

Baldwin, along with Paul Collins, Brian Nightingale, Scott Reynolds and Steve Schlosser, left BTG after that company sold its reseller business to Government Technology Services Inc. His colleagues joined ITC, a Fairfax, Va.-based product and services provider, last February.

GTSI reported a profit of $2.3 million in 1998 on revenue of $605.9 million—its first profitable year since 1994.

The profit, including $1.7 million in net earnings in the fourth quarter, compares with a loss of $5.1 million in 1997, the company said in a statement. Revenue, which grew 25 percent in 1998 compared with 1997, included $173.9 million in the fourth quarter—an increase of 23 percent over the same quarter in 1997.

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