I-Net Buy Strengthens Wang's Federal Mission
Integrator looks for more acquisitions to fuel government and network management sales
Wang Laboratories' acquisition of I-Net Inc. marks the beginning of a buying spree intended to make the $1.2 billion services company more of a formidable competitor in the federal and network services markets, analysts and company executives say.
"There will be the niche players and there will be the larger players. We will be a larger player," said Joseph Tucci, chairman and chief executive officer of Wang Laboratories in Billerica, Mass. "I will continue to aggressively pursue this [network services and government] market."
According to Wang's chairman, the acquisition of the $333 million integrator in Bethesda, Md., will help the company grow its federal sales to nearly a third of its overall revenue. Wang's federal division currently accounts for 25 percent of the company's overall revenues. The acquisition also gives Wang access to coveted government customers such as NASA, the Air Force, Army and Navy.
There is much speculation among industry analysts about Wang's next potential acquisition. The integrator has been eyeing Cordant Inc., Reston, Va., analysts said. Cordant President Peter Kusek would not comment on the potential sale of the company.
"I would be very surprised if this is the last one," said Tom Brown, vice president and senior analyst of Prudential Securities, New York. "Wang is now going to be aggressive in finding acquisition opportunities in Washington," said Brown.
However, Brown said the I-Net acquisition would have to overcome a number of obstacles before it proves successful. "With any acquisition strategy you have to learn how to integrate," said Brown. "It's easier on paper. But Wang has a good track record of integrating."
Bob Deller, director of market research for Global Systems and Strategies, Vienna, Va., said the acquisition may indicate the shortcomings of earlier acquisitions. "For Wang to have purchased I-Net, it shows no confidence in Wang Federal and HFSI," said Deller.
Wang Federal is the product of a merger between Wang Federal Systems Division, formally based in Bethesda, Md., and HFSI, the McLean, Va., systems integrator acquired by Wang Laboratories in January 1995.
According to Deller, the I-Net acquisition is a favorable investment in Wang's future, and the company will likely recover the $167 million investment through increased business.
I-Net, founded in 1985, has grown an average of 40 percent to 50 percent per year in revenue and personnel. In its 10-year career in the government's 8(a) program, I-Net received federal and commercial contracts worth more than $508 million.
I-Net's founder and president Kavelle Bajaj said in 1994 that she hoped to grow the company to $1 billion by 2000. She will be leaving the company to pursue other interests; her husband, Ken, will be part of the transition team. He will serve as president of I-Net, which will be operated as a wholly-owned subsidiary of Wang, according to a statement released by Wang.
"We think this acquisition can serve two business needs [by strengthening] both our federal market and network services business," said Tucci.
Wang, founded in 1951, executed an acquisition strategy in August 1993 after filing for bankruptcy in 1992. The acquisition strategy focuses on transitioning the company away from its core word processing hardware business into the network integration business.
Wang Federal, a wholly owned subsidiary of Wang Laboratories, is an information technology services and software corporation with $250 million in revenue and 1,000 employees.