Orange To Take the Big Public Squeeze

Orange Systems, a small computer software and services company is going public. But will it be successful in attracting investors?

Wallace E. Scherer, CFO of Orange Systems, is putting his money on a horse well-known to entrepreneurs: an investment banker. The Gaithersburg, Md., company wants to raise the capital needed to go public by next year.

"You have to ride the right horse to win the race," said Scherer. The investment banker who will sell the company's securities has not been found yet, he said. Orange Systems, founded in 1981 and a supplier of integrated manufacturing/business systems, network education, and computer and maintenance services, plans to go public in late 1995 or early 1996, and expand into new national and international markets. This includes growth in both professional and technical services and software development.

Orange Systems' $23 million revenues for FY 1994 represent a $3 million increase over 1993. After Orange goes public, Scherer expects annual revenues to reach $100 million within five years, with software revenues increasing by 50 to 100 percent per year. "We use the phrase 'a hundred at ten in five' when we talk about our goal," said Scherer. "We know it's ambitious."

The 203-employee company deals with many different branches of the commercial software industry including products and services for the printed circuit board and software solutions and custom support for association management using the Oracle database. Orange Systems also offers authorized certification training for industry vendors such as Novell and Microsoft. The company even deals with clients as diverse as heating and air conditioning duct contractors.

Scherer said he believes potential investors could be scared off by the varied products and services that Orange Systems offers. "We are complex to understand," he said. "People will want to know what we do and what we do successfully." However, the attractions of a diverse company often outweigh the unappealing aspects.

The different products and services Orange Systems offers are related, but at the same time far enough apart in the software economy to ensure financial stability. Scherer is also hoping Orange Systems' plan to triple the size of its educational services, already 9.5 percent of the company's first quarter 1995 revenues, and enlarge the number of software products by 30 percent by the end of the year will make the stock attractive.

Scherer believes that the diversity of the company will not stand in investors' way: "Even though complex, the company's results are very, very good. We can grow sales and profits by 30 percent in a year through expansion and acquisition of smaller companies." Scherer relies on the progressive computer industry's tendency to be interested in services and hardware. "Most small software companies are overwhelmingly successful when going public due to the great demand for technology stocks," said Ken Wasch, executive director of the D.C.-based Software Publishers Association.

Scherer said Orange Systems decided to go public not out of necessity, but out of the opportunities it will open to them. It will allow extra funds for acquisitions, and cash to pay small debts. Scherer is excited about the prospect of using stock as incentive for employees. The negatives, too, are apparent. "The cost of sharing ownership with people you don't know and might not ever meet is high. They have a financial interest in the company, while we've done it because that's what we wanted to do. This will be a fundamental change for people," said Scherer.

Orange's Products and Services

Business systems

Novell authorized education center

Technical services and field operations

Special products group

Integrated manufacturing systems

Automated design services and laser

photoplotting services

Drawmaster CAD group


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