Software, Consulting Spur GSE's Global Move

GSE Systems leverages recent purchases to help expand market share, both here and abroad

A small Columbia, Md., company is combining the trendy practice of business process reengineering with software designed to control and simulate industrial practices.

So far, the strategy seems to be working. GSE Systems Inc. reported second quarter earnings more than doubled as a result of sales increasing 91.6 percent. Revenue for the second quarter of 1995 was $22.8 million compared with $11.9 million for the same period in 1994, said William Kuhlmann, chairman and CEO. A large part of the company's sales increase can be attributed to its December 1994 purchase of Hunt Valley, Md.-based Process Solutions from Texas Instruments Inc. for $8.8 million, said Kuhlmann.

GSE's stock, which became publicly available July 27, has gone from the initial offering price of $14 a share to approximately $15.50 per share. The offering of 1.5 million shares raised $21 million that will be used to pay debt from the acquisition, expand operations, perform research and development, and enhance sales and marketing efforts, said Kuhlmann.

The company's bread and butter is in the specialized area of industrial process automation. One segment of the business develops systems that monitor and adjust conditions in industrial operations, for example, the pressure or temperature in a tank where a chemical reaction is occurring. The company also has systems that monitor conditions and alert operators to problems.

Additionally, a consulting division helps companies perform business process reengineering, said Jim McMenamin, of McMenamin Communications, a Towson, Md., consulting firm retained by GSE.

"A significant, but not overwhelming" segment of the simulation software developed is for nuclear and other power industries, McMenamin said. The software can simulate emergency situations and train workers how to respond or it can act as a model track operations in unbuilt plants and spot potential problems before they occur, he said.

Because of the U.S. public's opposition to nuclear power, much of GSE's business is not domestic. In 1994, approximately half of the company's revenue came from international sales and services. The company, which has more than 550 employees, maintains offices in Belgium, Japan, Korea, Singapore, Sweden and Taiwan, McMenamin said. Asia is a potentially larger client base than the former Soviet republics

Asia is experiencing 6-to-10 percent real growth in most areas, including manufacturing, so there is certainly a lot of market potential, said Stephen Pattillo, with the Washington, D.C.-based U.S.-Asean Council for Business and Technology.

The more basic infrastructure is growing faster in less developed countries, he said. For example, building power generation plants is a fast growing segment in the Philippines, while Singapore, Thailand and Malaysia are more service-oriented with strongly growing market segments in shipping and healthcare.

GSE Systems was formed in April 1994, when three firms, which are now GSE subsidiaries, merged. S3 Technologies, EuroSim, and GP International and Simulation all developed simulation software that can be used for training or to predict future problem areas, said McMenamin.

The different subsidiaries work well with each other, McMenamin said. BPR analysts work at the highest level and might discover problems with specific process areas that lead to opportunities for the other groups.

Or it could go in reverse, a company that wants to implement a process control or simulation technology might discover that they need more help in mapping the big picture, McMenamin said. Either way, those synergies seem likely to help GSE continue its recent string of financial and marketing successes.

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