Young CEO Helps Raise Telos from the Dead

One of the original integrators finds new life after years as a corporate orphan

P> "What a long, strange trip it's been!" is how John Wood, the 32-year-old fan of the Grateful Dead characterizes the nearly three-decade odyssey of Telos Corp. Since taking the helm in January 1994, Wood has rejuvenated the Herndon, Va., company many had left for dead.


But despite his youth, Wood knows the dangers of the territory. "To a certain extent, it's a Darwinian world. You don't want to be food" for another company's lunch. "You need to build and create business to prevent that from happening."

During the past two years, Wood has done just that. He has strengthened the $200 million company's position in the marketplace by winning a $900 million contract with the Army. And he has shaken up a rigid and hierarchical chain of command that made the company's decision-making process 286-fast in a Pentium market. Those changes have given Wood a fighting chance to stay on a higher link in the business food chain. More importantly, they make Telos a player once again in the ultra-competitive market for federal computer systems integration.

But a year ago, few would have predicted Telos could achieve such a position.

Not unlike systems integrator PRC Inc., McLean, Va., Telos has been treated like a corporate orphan, shuttled from foster home to foster home by larger companies. The company in 1989 was acquired by Chantilly, Va.-based Contel Inc., but GTE Corp., Stamford, Conn., bought Contel in 1991. After the purchase, GTE announced it would spin off Telos.

In 1992, New York investment banker Fred Knoll orchestrated a takeover of Telos. He then combined Telos with a Navy systems integrator known as C3. The acquisition provided C3 with much-needed experience in software and project management. He made the combined companies private again and ran Telos as a subsidiary. But according to a former insider, Telos executives were frustrated with poor performance and forced Knoll to leave and sell his stock in October 1993. They changed the name of the company back to Telos in May 1995 because much of C3's business was with Telos -- which in Greek roughly stands for the "end" or "ultimate."

"[Knoll] was thrown into a management role, but it didn't work. The C3 acquisition came at a [high] price, and it was difficult for the company to swallow," said Wood. Times grew worse in February 1993, when the systems integration division of C3 laid off 45 employees and furloughed 65 employees for up to three months. Remaining C3 employees took a 10 percent to 20 percent pay cut, but the company paid back those employees by the end of 1993.

Only with difficulty has Telos adopted new management ideas. "We were a very hierarchical company. It took a long time for an idea to get from the author to the decision-maker," said Wood. "We use e-mail now a great deal, which facilitates information sharing at all levels of the company. There shouldn't be a hierarchy when it comes to idea sharing. We want to develop a nurturing environment that encourages cooperation among all."

In early December, Telos used the new e-mail culture to prepare a proposal to a potential customer. A direct salesman posted an e-mail message about an oil company he was going to approach on a sales call. Within days, he received advice from other Telos colleagues on how to approach the potential customer, given the company's business and history. At press time, Telos had not yet received word about whether the oil company had accepted their bid, but a company spokeswoman said "the e-mail system collaboration changed the sales call from a cold call to a warm call."

Telos reported one major and two small contract wins with the federal government in the fall. It won the Army's $900 million Small Multi-User Computer contract for network integration. Under this contract, Telos will provide hosts, workstations, digital cameras, printers and field-deployable equipment for RAPIDS, a worldwide system that provides equipment to produce and read military identification cards. In October, Telos won a guaranteed one-year, $3.4 million contract to modernize the House of Representatives' computer system. In September, Telos won the nearly $18 million Realtime Automated Personnel Identification System (RAPIDS) contract with the Defense Supply Service-Washington.

Telos has four functional business areas: contract labor and consulting, systems maintenance for hardware and software, systems integration and products. The company also manufactures personal computers, which allows it to change configurations more easily, abide by the government's stringent delivery standards and also meet the international manufacturing standard known as ISO 9000, said Wood.

Competitors include Computer Sciences Corp., El Segundo, Calif.; Electronic Data Systems Corp., Plano, Texas; I-NET Inc., Bethesda, Md.; and Science Applications International Corp., San Diego, Calif.

Leading Active Contracts

ContractValueContractor

Small Multi-User Computer (SMC-II)$900 millionArmy

Personal Workstation Acquisition Contract (PWAC)$108 millionINS

Communications Engineering Life Cycle Software Support$107 millionArmy

Fire Support Life Cycle Software$91 millionArmy

Technical and Engineering Support of Jet Propulsion Laboratory$44 millionNASA


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