Vista Eyes Voice, Networking Opportunities

By Nick Wakeman, Staff WriterWith six acquisitions under its belt, Vista Information Technologies Inc. is poised to exploit growing opportunities from the convergence of voice and data networks in the government and commercial markets.Herndon, Va.-based Vista has racked up six acquisitions in its short history, but is shifting away from that strategy to focus on internal growth, company officials said. "Acquisitions are only building blocks for internal growth," said James Duggan, president and chief executive of Vista, which was founded in March 1997. Duggan used acquisitions to build a $100 million a year company that provides networking services, including design, implementation, maintenance and operations of voice, video and data networks. About 30 percent of the company's revenue comes from the federal government, where Vista has customers in Veterans Affairs, Health Care Financing Administration (HCFA) and the U.S. Postal Service.Duggan expects better than 30 percent growth from both government and commercial customers. Vista's business is likely to stay at its current mix: 30 percent government, 70 percent commercial.Internal growth should top 30 percent a year, said Duggan, whose goal is to reach $400 million in sales by 2002. Acquisitions may still play a role in that growth, but company officials will be very selective about future deals, he said.One of Vista's biggest customers is the Department of Veterans Affairs, where Vista parlayed a single $10,000 project into $5 million in business through a series of contracts in the last two years.The company is in the midst of building a new phone and data system for the Veterans Affairs' Veterans Integrated Services Network 12, also called VISN 12, which serves northern Illinois, Wisconsin and upper Michigan. The system, which will connect eight hospitals and 24 clinics, will be a showcase for Vista, Duggan said. The VA will be able to use its data network, which already links its facilities, for phone service.The new network will result in major savings, officials said. Phone calls between the hospitals and clinics that were subject to long distance charges will cost the same as a local call, said Jeff Murray, vice president of enterprise voice services. And applications such as telemedicine, videoconferencing and "triage" services for veterans calling in with medical questions will become easier to implement, he said.The Department of Veterans Affairs also can realize other savings through better call center, administrative and maintenance services.Vista's work with the VA began in July 1997, when the company won a small project with a $10,000 bid. "We began a relationship with them when they won that bid," said Ken Vanderwaal, the VA's telecommunications manager for VISN 12. "We began to see some of their greater assets."The VA was impressed by Vista's ability to develop call centers, use Window NT and develop network applications, Vanderwaal said.He said he expected other VA VISNs and other government agencies to use the work in VISN 12 as a model.Other government work Vista won in 1998 include a $1.8 million contract with the Postal Service for network services and a $1.3 million contract with HCFA for network support services.Vista also formed a help-desk consulting practice in November that will pursue government and commercial work, Duggan said."We are growing this on our own," Duggan said. "If we tried to buy [a consulting business,] it would have cost us a hell of a lot of money."Shifting from acquisitions to internal growth and development is a smart move, given the company's past buying spree, analysts said.Integrating acquisitions often is the toughest part of an acquisition strategy, said Larry Davis, who runs the government and technology services practice for Aronson, Fetridge & Weigle, an accounting firm in Rockville, Md., that specializes in management consulting and merger and acquisition services."If you are trying to do acquisitions, keep an eye on your markets and pull all the pieces together, something is going to suffer," Davis said. "So you have to step back, digest and regroup."Integrating acquisitions takes a lot of management focus and is more work than simply buying companies, he said."If all your acquisitions operate independently, you'll never get the value out of them," said Thomas Meagher, an associate with investment banking firm Boles, Knop & Co. of Middleburg, Va. Meagher said he expects Vista to go public eventually, so it must integrate its acquisitions to create value.While becoming a public company is a possibility, there are no plans now to do that, Duggan said. "The focus right now is on building value," he said.