CTA Boosts Revenues With Year 2000 Contracts


CTA Boosts Revenues With Year 2000 Contracts

By Tania Anderson
Staff Writer

After a year of declining revenues and postponement of an initial public offering, CTA Inc. is aggressively pursuing contracts for year 2000 work to boost overall revenues and lay the groundwork to go public.

Through a strategic alliance and planned acquisitions, Rockville, Md.-based CTA expects to bolster its information technology unit and expand its portfolio in the year 2000 arena by targeting state and commercial business.

Raymond McMillan, president of CTA's Information Technology Services Co., said CTA plans to acquire one or two small, IT commercial entities by the end of 1997.

"We see our expansion in state and commercial contracts," said McMillan, a retired U.S. Air Force brigadier general. "Commercial work is growing, state work is growing and the federal market is leveling off."

In the last three years, CTA has won several state government contracts to provide year 2000 conversion solutions through its partnership with Viasoft Inc. in Phoenix. CTA is one of 24 companies that participates in Viasoft's Solution Provider Program, which allows participating companies to sell Viasoft's year 2000 product.

"[CTA] is a very aggressive provider of our year 2000 solution," said Frank Hill, director of the services center for Viasoft. "It's one of the strongest providers of state governments that we work with."

McMillan says the company is targeting states across the country for software conversion work.

"We are bidding one or two [opportunities] a week from the various states that are hitting the market right now," said McMillan.

Established in 1979, CTA is broken into three subsidiaries. The Information Technology Services Co. provides a range of information technology and systems integration services. The Space and Telecommunications Systems Co. builds satellites and related support systems. The Mobile Information and Communication Services Co. pursues applications of CTA's proprietary technology.

CTA's 1996 revenues were $179.7 million, a decrease of 20.8 percent from $217 million in 1995. In its 1996 annual report, CTA attributed the loss to a $9.4 million decrease in IT revenues and a $27.9 million decrease in Space and Telecommunications Systems revenue.

CTA's attempt to go public fizzled earlier this year. The company filed a statement to go public with the Securities and Exchange Commission in September 1996 but withdrew its filing of 3 million shares of common stock on Feb. 20.

Underwriter Lehman Brothers, New York, advised company officials in February that they would not get a desirable stock value due to declining revenues throughout 1996, according to McMillan.

Plans call for the company to resubmit its filing after several quarters of growth, McMillan said.

Late last fall, CTA was considering the purchase of three companies but held off because of the IPO delay. McMillan, who would not identify those companies, said CTA is now looking again for companies to acquire.

McMillan said the company is counting on getting a piece of the $30 billion federal and state market for year 2000 software conversion. He expects $110 million in revenues in 1997. The division's 1996 revenues were $100 million, a 10 percent drop from its 1995 revenues of $109 million.

CTA also sees its pot of gold in commercial markets. The company is planning to use its luck in state contracts to pursue year 2000 work with commercial entities, according to McMillan. The company currently has a contract pending with a commercial aviation company for year 2000 work.

In August 1996, the company won a $22 million year 2000 contract from the state of Nebraska to convert all of the state's mainframe application software and databases.

CTA also won a $25 million contract from the state of Kansas in December 1995 to assess the scope of the year 2000 conversion problem in several of the state's agencies.

"The state of Nebraska contract is a big win for CTA," said Bill Loller, project leader for G2 Research Inc. in Mountain View, Calif. "Vendors are really following the money."

But many large federal integrators are chasing the same money pot with state and local governments. IBM Corp., Unisys Corp. and KPMG Peat Marwick will dominate the market because of their long-standing state and local focus, said Loller.

States such as California, Texas and New York will be where the year 2000 money is in the next year, said Loller.

The majority of contracts in 1997 will be assessing the year 2000 conversion problem, and the actual conversion will take place in 1998, said Loller.

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