Fast 50: 2000 Hot Companies Reflect Sizzling Region

Fast 50: 2000 Hot Companies Reflect Sizzling Region<@VM>Fast 50 2000 List<@VM>Sky Has No Limit for Primus' Ambitions<@VM>Bundled Services Spell Success for Net2000<@VM>Biggest 8(a) Companies<@VM>Face Time's a Rare Event at Turner Consulting<@VM>Turner Consulting Group<@VM>Top Revenue Generators Among the Fast 50<@VM>No. 1 Companies From the Past 10 Years

By Nick Wakeman

The Internet, telecommunications and government information technology services are the fuel firing some of the fastest-growing companies in the Washington region.

High-flying Primus Telecommunications Group Inc. of McLean, Va., scored the No. 1 spot on Washington Technology's Fast 50 list with $828 million in 1999 revenue and an eye-popping growth rate of 70,851 percent over five years. The global telecom company offers voice, data and Internet services to consumers and businesses, including Citigroup Inc., Ford Motor Co. and Volkswagen AG.

At the other end of the Fast 50 spectrum is Essential Technologies Inc., a Rockville, Md., developer of crisis and environmental management software. Essential earned the last spot with a not-too-shabby growth rate of 192 percent over the past five years and $17.9 million in 1999 revenue.

In between Primus and Essential are myriad companies providing a wide range of technology products and services. In total, the Fast 50 companies raked in better than $2.2 billion in 1999 revenue.

"This is a very hot region right now," said Douglas Schmidt, managing director for the investment banking firm Legg Mason Wood Walker Inc. of Baltimore. "There was a virtual doubling of venture fund investments [in this region] between 1998 and 1999."

Quoting data compiled by the accounting firm PricewaterhouseCoopers of New York, Schmidt said venture fund investments in the mid-Atlantic region totaled $3.3 billion in 1999, up from $1.71 billion in 1998.

"This area has gained a national reputation and soon to be an international reputation," said Roger Mody, president and chief executive of Signal Corp. of Fairfax, Va., No. 44 on the list with $175 million in 1999 revenue and 422 percent growth over five years.

The list reflects a growing diversification among technology companies in the region. Last year, there were only two companies specializing in telecommunications; this year's Fast 50 list contains seven such companies.

"A number of telecom companies that got started in the last few years are really coming into their own right now," said Calvin Hackeman, director of the government technology services practice at the accounting and consulting firm Grant Thornton LLP in Vienna, Va.

"Primus has been well-positioned since day one to take advantage of deregulating telecommunications markets worldwide," said Tom Morabito, a telecommunications analyst with BB&T Scott and Stringfellow Inc., a Richmond, Va., brokerage and investment firm.

Systems integrators and information technology services hold 24 of the 50 spots on the list. Five companies are software developers, five run Internet-related businesses and four described themselves as networking companies. Others on the list tout capabilities such as simulation and training, multimedia expertise and management consulting.

Fast 50 companies are ranked strictly by revenue growth over a five-year period from 1995 through 1999. They must have had revenue of at least $100,000 in 1995 and $1 million in 1999, and they must have headquarters in the District of Columbia, Maryland or Virginia. They do not have to be profitable or employ a certain number of workers.

"The amazing growth of the Internet has created a very conducive environment for our growth," said Steven Heckler, president of WestLake Internet Training, a subsidiary of WestLake Solutions Inc., an Arlington, Va.-based provider of Internet training and consulting. WestLake hit the No. 4 spot on the list with $4.4 million in revenue and 4,006 percent growth over the past five years.

Three publicly traded companies made the list: Primus, Network Solutions and Axent Technologies Inc. Herndon, Va.-based Network Solutions, No. 12 with $144.8 million in 1999 revenue and growth of 2,134 percent over five years, is the leading registrar of Internet domain names. Axent Technologies of Rockville, Md., at No. 38 with 1999 revenue of $115 million and 517 percent growth over five years, provides network security.

While the greater Washington area boasts a technology base that is diversifying, a common thread for many

Fast 50 companies is the federal government. Forty-four of the 50 companies on this year's list claim the government as one of their major customers. Of those 44 companies, 36 derive better than 70 percent of their revenue from the government.

The federal small business program known as 8(a) also is an important factor, with 31 of this year's Fast 50 companies certified as 8(a) companies and, therefore, eligible for set-aside contracts. Two former 8(a) companies also made the list. They are Signal and IntelliSys Technology Corp. of Fairfax, Va., which holds the No. 5 spot with $190 million and 3,485 percent growth rate over five years.

The nature of 8(a) companies has changed over the years, shifting from companies providing basic services, such as building maintenance and groundskeeping, to higher-end IT work, said James Ballentine, associate deputy administrator for government contracting and minority enterprise development at the Small Business Administration. SBA runs the 8(a) program.

"About one-third of the 8(a) firms are involved with some aspect of information technology, and many are doing exceedingly well," he said.

The 8(a) companies also are getting a boost from rampant consolidation within the government IT market, Hackeman said. As the large players gobble up midsized companies, smaller companies such as 8(a)s are stepping into the void, he said.

While some government buying practices favor large contractors as primes, the government still is committed to supporting small businesses, said Jerry Grossman, managing director for the investment banking firm Houlihan Lokey Howard & Zukin of McLean, Va.

And many small companies are finding success as key subcontractors to the large companies on the mega government contracts, Grossman said.

"The government is tremendously important to our growth," said Steven Baldwin, president and CEO of IntelliSys. He estimated that 99 percent of the company's revenue comes from contracts with agencies such as the Army, the Defense Health Affairs Agency and the departments of Justice and Treasury.

Baldwin and four other former executives from BTG Inc. of Fairfax, Va., bought a controlling interest in IntelliSys in 1998.

IntelliSys primarily is a reseller of IT products but has a growing services business, which makes up 15 percent of total revenue, Baldwin said. He estimated that his company would grow to about $300 million in 2000 from $190 million in 1999.

"The federal government still stands as the biggest customer in the world," said Signal's Mody, whose company garners about 90 percent of its business from the federal government.

The government also is an attractive market because it buys a lot of cutting-edge technologies, especially electronic commerce solutions, Schmidt said.

Companies that can provide goods and services in electronic commerce, security, Internet and telecommunications are the ones that will continue to succeed, industry observers said.

Heckler of WestLake said business-to-business electronic commerce solutions will be the hot area in the future. Using the Internet as a tool for people in different locations to work together also will continue to grow quickly, he said.

The folks over at Primus certainly see bandwidth, the pipes through which voice, video and data are moved, as a key to future financial success.

"The people who made money during the California gold rush were the ones who sold the picks and shovels to the gold miners and ran the hotels," said John DePodesta, executive vice president for law and regulatory affairs for Primus. "Primus has positioned itself to provide everything the gold miners today need, such as bandwidth, Web hosting and [digital subscriber lines.]"

Fast 50 2000 List

Paul Singh

By Steve LeSueur, Staff Writer



Even in today's rapidly expanding technology market, the astronomical growth rate of Primus Telecommunications Group Inc. demands a second look, just to make sure the calculations are right.

Annual revenue at the McLean, Va.-based telecommunications company rose to an estimated $828 million in 1999 from a mere $1.167 million in 1995. That is a five-year revenue growth of 70,851 percent (do the math yourself), easily earning Primus the top ranking in this year's Washington Technology Fast 50.

"We went from a million dollars to a billion dollars in four years," said John DePodesta, Primus' executive vice president for law and regulatory affairs. He was referring to the company's 1999 third quarter revenue of $250 million, which equates to an annual run rate of $1 billion.

The company's goal from the beginning was to establish a global presence as a telecommunications provider of voice, data and Internet services, said K. Paul Singh, chairman and chief executive officer who, along with DePodesta, co-founded Primus in 1994.

Primus has 1.7 million residential and business customers in 29 countries, including major financial and multinational companies, such as Citigroup Inc., Ford Motor Co., Goldman Sachs Group Inc. and Volkswagen AG.

The company reported a net loss of $28 million in the 1999 third quarter, but reported positive earnings before interest, taxes, depreciation and amortization. Revenue was $421.6 million in 1998 and $280 million in 1997.

Primus is two years ahead of its revenue goal and should see positive earnings within about three years, said Singh, who has had other start-up successes.

In 1983, Singh founded Cygnus Satellite Corp., which was soon acquired by PanAmSat Corp. of Greenwich, Conn. In 1984, he founded Overseas Telecommunications Inc., which was acquired in 1991 by MCI Telecommunications Corp., now MCI WorldCom of Clinton, Miss.

Singh had little trouble finding financing for Primus because of his previous record starting and selling successful telecommunications companies, said Tom Morabito, a telecommunications analyst with Scott and Stringfellow Inc., a Richmond, Va., brokerage and investment firm.

The Primus management team includes many of the same people who helped Singh run Cygnus and Overseas Telecommunications.

"Primus has a great reputation on Wall Street because these are people who have done it before and know what they're doing," said Morabito. He rates Primus as a "strong buy," as do six other analysts who follow the company for their brokerage firms.

Primus executives call the company a "total service provider" that offers five major services to telecommunications customers:

? Global ISP. The company is an Internet service provider in four countries. It is the fourth largest provider in Australia and the fifth largest in Canada and Brazil, company officials said.

? High-speed digital service lines. The company acquired Digital Select LLC in November 1999 to enhance its capability to provide DSL, a technology that uses existing copper telephone wires to deliver high-speed data services.

? Satellite bandwidth services. Primus is building a global satellite network that will add another 80 countries to its network within the next six months, said DePodesta. "Our philosophy is to offer customers integrated fiber and satellite solutions," he said.

? Data services. The company provides value-added services to traditional Internet services, such as secure, private networks, e-commerce solutions, data storage and other electronic applications.

? Web hosting. The company can create and maintain Web sites for customers.

Although Primus serves many large corporations, company officials view high-end residential users and small- and medium-sized businesses as the primary targets for their bundle of services, such as DSL, Web hosting and other Internet services.

"This is true one-stop shopping," said DePodesta.

Among Primus' chief competitors in this arena are Equant N.V., Amsterdam; Global Crossing Ltd., Beverly Hills, Calif; and PSINet Inc. of Herndon, Va., said Singh and DePodesta.

The company's rapid growth has been spurred in large measure by acquisitions. Primus made eight acquisitions in 1999, adding companies that helped it enter new markets and enhance its five service areas.

In November, for example, Primus acquired 1492 Technologies of Alexandria, Va., to bolster its Web hosting and e-commerce capabilities. On Jan. 5, the company announced that it was making a $15 million investment in Pilot Network Services Inc., Alameda, Calif., a maker of secure e-business software.

On Jan. 12, Primus announced a fiber-optic network agreement with Qwest Communications International Inc. of Denver. One day later, company officials announced a strategic agreement with Akamai Technologies Inc. that will improve Primus' Web hosting and e-business capabilities.

Company officials expect to continue their aggressive acquisition strategy during the coming year.

Although less than one-tenth of 1 percent of the company's revenue comes from government business, Singh said he likes being based in the Washington area because it gives Primus access to highly talented people and businesses, including small and minority businesses that work for the federal government.

"As we move into the future, we will look for companies in this area who have IT and IP expertise," he said.

Because of Singh's history of founding and selling companies, some investors have wondered whether he will do the same with Primus.

"The company is strong enough to stand alone, but it's also an attractive acquisition candidate," Morabito said.

Singh said many smaller companies in his industry are gobbled up by the larger players, but that is not his intention. "There is a dynamic at work that either you buy and grow big, or you get bought," he said. "Our plan is to purchase other companies to become a multibillion-size total service provider in the new digital commerce world."

Primus went public in 1996. Its stock, after touching a 52-week low of under $9 a share in April 1999, has risen steadily and was trading at more than $35 in early January.

"The market is beginning to understand Primus' potential as a major data and Internet player on a world scale," said DePodesta.

Charlie Thomas

By Jennifer Freer, Staff Writer



Net2000 Communications Inc., a provider of business telecommunications services, has moved to the top 20 realm of Washington Technology's Fast 50 companies with revenue growth of more than 1,400 percent over the past five years.

The Herndon, Va.-based company has carved out a strong place in the hot broadband telecommunications market because it is one of a few that bundles its local, long distance, voice, data and Internet services and conveniently bills those services on a single invoice, said Charlie Thomas, chief executive officer of Net2000.

"The advantages we have are to bundle multiple services on a high-speed connection and offer services on a single broadband, which is billed on a single invoice," said Thomas, a one-time Bell Atlantic employee who founded Net2000 in 1993.

Net2000 nearly doubled its revenue during the past year, jumping from $9.4 million in 1998 to $18.7 million as of Sept. 30, 1999. Net2000 landed the No. 16 spot on Washington Technology's Fast 50 list, up from No. 31 last year ? the largest jump by any company. But even its recent growth rate pales in comparison to its blistering four-year rate. Net2000 had $1.24 million in revenue in 1995, racking up an impressive growth rate of 1,408 percent through 1999.

And the company wants to continue its growth spurt with an injection of cash through an initial public offering of its common stock. Net2000 filed a registration statement with the Securities and Exchange Commission last December to raise $172 million in the public offering. The company's proposed stock symbol is NTKK, and it would be traded on the Nasdaq national market.

With the proceeds, the company plans to fund the expansion of its national network infrastructure, expand its sales force and pay off debts.

Because of the filing, the company is now in a quiet period that Thomas said restricts him from discussing future plans. But there are no immediate plans for acquisitions or new business ventures, said Thomas.

The rapidly growing company focuses on high-end customers, primarily large and medium-sized businesses with a minimum of 50 business access lines and spending over $50,000 annually for Internet, data and voice telecommunications services.

While traditional companies like the Baby Bells have focused on Fortune 500 companies, that is not the strategy of Net2000, according to Thomas. "We are focusing on the other customers. We are targeting the customer underserved by local companies and we have an advantage over larger players in the market."

Plans call for the company to continue to build its network in major markets throughout the United States in three phases, with completion slated during the next two years, Thomas said. Net2000's first phase is mostly complete, with 13 data switches and five voice switches from Washington, D.C., to Boston.

Phase two is scheduled to be completed by December 2000. It will consist of 10 data switches and two voice switches, adding 10 more markets and giving Net2000 a national presence. By late 2002, phase three should add four more markets and upgrade existing switches to Internet multiservice communications centers.

Net2000's plan to expand its infrastructure is designed to meet the high demand for broadband services and beat out some of its larger competitors. They include so-called competitive local exchange carriers such as e.spire Communications Inc., Annapolis Junction, Md., Winstar Communications Inc., New York, and Teligent Inc., Vienna, Va.

CLECs, which compete against incumbent local exchange companies or Baby Bells such as Bell Atlantic Corp., are not under the strict guidelines in offering long distance service as the Baby Bells. And unlike older, more traditional telecommunications companies, CLECs can combine their services.

"Grabbing the market by increasing capital and building networks as fast as possible are the keys to a growing telecom company," said Mel Marten, a telecommunications analyst with Edward Jones, a St. Louis-based investment research firm.

"In order to keep growing and build networks, capital is a necessary step," Marten added. "In the past years, we've seen that IPOs draw advertising and attention."

Focusing on its high-end market of medium- to large-sized businesses, Net2000 has acquired more than 1,000 new customers, representing more than 70,000 access lines since July 1998. All told, Net2000 has more than 3,000 customers.

Although most of the company's customers are commercial clients, Net2000 plans to pursue more federal government customers in the future, according to Thomas.

"The thirst for broadband is growing with the growth of Internet Web-based applications, and we expect to see a continued need for broadband services," Thomas said.

Net2000's Baby Bell competitors hold 96 percent of the market share. "Right now, CLECs have a big opportunity because Baby Bells can't offer long distance," said Marten. One exception is Bell Atlantic, which recently got the go-ahead from the Federal Communications Commission to offer long distance services in the state of New York.

"In order to do well, CLECs need a strong management team that can grow the business and management has to be familiar with Wall Street to raise capital," Marten explained. Out of five random CLECs, for example, two might do very well; two will do fairly well and one will fail, said Marten.

One of Net2000's customers, CyberServ, Vienna, Va., a help desk call center, has been a Net2000 customer for over four years. CyberServ officials said Net2000's position in the market has gotten stronger and its range of services has increased.

"If our communications go down, we are out of business," said Smith Wood, the CEO at CyberServ. "Net2000 is a one-point source of communications and a critical part of our operations."

Other Net2000 customers include AskJeeves.com, Cable & Wireless plc, Georgetown University Law Center, Pepco Energy Services, Teleglobe and Vialog Communications.
































Company1999 RevenueRank
Intelligent
Decisions Inc.
$200 million34
Force 3 Inc.$89 million47
HCI Technologies
Inc.
$40 million42
RS Information
Systems Inc.
$39.9 million9
QSS Group Inc.$36.2 million13
New Technology
Management Inc.
$24.7 million6
Caelum Research
Corp.
$24 million48
Computer & Hi-tech
Management Inc.
$22.5 million10



Daniel Turner

By Calli Schmidt, Contributing Writer



Dan Turner exudes the confidence of a guy who is sure he is about to make it big.

At 27, he is chief executive officer of Turner Consulting Group, a Web application development company he founded in 1994, just after graduating from Rutgers University with a double major in computer science and creative writing.

Washington-based TCG has 22 employees, a number Turner plans to almost triple by the end of 2000. What sets his company apart from the rest of the crowd is that all but two of the employees telecommute. Indeed, Turner believes so fervently in the concept that he considers it TCG's second-most important mission behind company growth.

"We've become experts on telecommuting," said Turner, who along with the office manager are the only two that do not telecommute. The rest of the employees ? documentation specialists, programmers and project managers ? have a shared aversion to commuting. They use 800 telephone numbers to dial up their coworkers and the fastest Internet access available to get their jobs done.

But Turner is ready to raise the heat under his business, which posted $1.28 million in revenue in 1999, up 844 percent from $135,407 in 1995. The company, which grabbed the No. 25 spot on Washington Technology's Fast 50 list, already had $300,000 in receivables by mid-January, according to Turner.

His plan is to triple revenue this year, increase it by 150 percent each year over the next few years, then sell the company, lock, stock and barrel. By the time he's 30, Turner said, he will try his hand at something else.

The company garners 75 percent of its business from government and has contracts with 10 federal agencies, including the National Institutes of Health and the National Science Foundation. It also has a spot on the General Services Administration schedule and a proprietary Web application server environment called SteelBlue, which has been developed for both commercial and government customers.

Turner's first contract came from NIH in 1994 after he put together the Edison system. It is a secure data collection and presentation solution that allows organizations that receive federal grants to fulfill federal reporting. The Bayh-Dole Act of 1980 mandated regular reporting on the disposition of certain intellectual property rights when inventions, patents or licenses come out of federal funding agreements.

  Edison users can also take advantage of the system's administrative functions, which include reminders of reporting deadlines, report generation and e-commerce features to cut down on the repetitive paperwork associated with the grant process.

  Turner "has this infectious enthusiasm about information technology and how it can be applied," said George Stone, an administrator in the office of extramural research at NIH who hired Turner to put together the Edison project.

It "wasn't even a company at that point. He was working from his bedroom at home," Stone said. But Turner came up with the idea for a "secure, interactive Web application when it was very, very hard to find the Web used in that way at all. ... Through the demonstration of his creative ability in that, he's continued to be one of our subcontractors."

Since those early days, TCG has developed a secure, Internet-based calendar for the National Cancer Institute and several other Web-based tracking solutions for other NIH customers using its SteelBlue software.

The NIH work has led to Turner's latest project: the Federal Commons. It will allow organizations looking for federal grant money from any number of federal agencies to use a common application form. A coalition of 17 agencies has signed up for the system, which also allows potential grant recipients to track the status of their applications through the federal vetting process.

TCG has a $200,000 contract from NIH to build the commons, but Turner expects to get additional money as more agencies sign on.

"We also have a contract to build the [National Science Foundation] part of it, and the NIH [part], and we're hoping to leverage that" to get more business, he said.

The company also recently established an electronic publishing arm to facilitate getting scientific journals on the World Wide Web. But Turner's big push, he said, will be into the commercial sector, concentrating on companies that require secure Internet transactions.

Turner, who paid the company's bills with his personal credit card when the 1996 federal furlough left him temporarily without customers, became convinced then that he needed to expand his customer base.

"[The employees] are all incredibly dedicated, they love what they do, and they'll do anything I want provided they don't have to change the telecommuting," Turner said.

He said his pay scale is probably a little lower than the industry average for most positions, but that his employees prefer the shorter work hours and less stressful lifestyle. "We have a strict policy of not allowing anyone to work over 40 hours a week," he said.

Turner's employees are scattered among 10 states, and all have been in the same room only once, at a staff meeting in Washington last September.

Turner now wants a sales force that can help him make good on the company's goal to triple its revenue. Until now, advertising has been by word of mouth, he said. Business: Web application development

Founded: 1994

Location: Washington, D.C.

CEO: Daniel Turner

Employees: 22

1999 Revenue: $1.28 million

Web Site: www.tcg-inc.com






















Companies'99 RevenueGrowth Since '95Rank
Primus Telecommunications Group Inc.$828 million70,851 percent1
Intelligent Decisions Inc.$200 million640 percent34
IntelliSys Technology Corp.$190 million3,485 percent5
Signal Corp.$175 million422 percent44
Network Solutions Inc.$144.9 million2,134 percent12
Axent Technologies Inc.$115 million517 percent38
EdgeMark Systems Inc.$90 million500 percent39
Force 3 Inc.$89 million274 percent47
HCI Technologies Inc.$40 million465 percent42
RS Information Systems Inc.$39.9 million2,661 percent9






















YearCompanyLine of Work
1991User Technology Associates Inc.Systems engineering and LAN management
1992Newbridge Networks Inc.Design, manufacture and sale of digital networking equipment
1993Netrix Corp.Integrated network switch manufacturer
1994Information Technology Solutions Inc.Engineering and data processing services
1995NCI Information Systems Inc.Information management
1996Houston Associates Inc.Communications and telecommunications engineering
1997Digex Inc.Internet service provider
1998Business Impact Systems Inc.Information technology services
1999Vistronix Inc.Systems integration, professional & technical services
2000Primus Telecommunications Group Inc.Telecommunications

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