STA Purchase Puts SI Int'l on Fed's Radar

STA Purchase Puts SI Int'l on Fed's Radar

Ray Oleson

By Jennifer Freer, Staff Writer

SI International Inc. is looking to use its acquisition of System Technology Associates Inc. to move more aggressively into the federal information technology and telecommunications market, company officials said.

SI International in March made STA of Colorado Springs, Colo., its fourth acquisition since January 1999. STA is an IT, systems engineering and telecommunications company.

The purchase of STA compliments SI International's business because the company is working to become an IT and telecommunications company with emphasis on the federal government, said Ray Oleson, chairman and chief executive officer for Vienna, Va.-based SI International.

"The whole world is being rewired," Oleson said. The people who have the capability to help create the infrastructure, design the network and provide consulting services are the people that will succeed in this market, he added.

SI International already has begun integrating STA with SI International and is planning to establish a stronger foothold in the federal IT market, especially in telecommunications. The company hired Osama Mowafi June 22 as vice president and chief technology officer for STA's Telecom Professional Services, with the intention that Mowafi would target federal customers.

Mowafi, a former vice president for GTE Laboratories Inc. and recently a private consultant, views Northern Virginia as a "hotbed of telecommunications."

"The federal government doesn't buy specialized telecom systems," Mowafi said. "They go for what is commercially available, so there is a tremendous synergy between supporting common carriers and what the government is asking for."

The government is asking for upgrades of networks, designing and consulting services. The purchase of STA and its telecom expertise will help SI International become a bigger player in that field, Mowafi said.

Some of STA's customers are the Air Force, the Energy Department and other telephone companies. SI International plans to expand the company's existing customer base and target the Army and other federal government agencies to join SI International's current customers, including the departments of Defense, Energy, Justice and State, the Office of Personnel Management and the Immigration and Naturalization Service.

With the purchase of STA, officials at SI International are looking to double their business this year ? an achievable goal, according to industry analysts.

"The purchase of STA will help SI International get into the government telecom market," said Thomas Meagher, vice president of equity research for the investment banking firm BB&T Capital Markets, a subsidiary of Scott & Stringfellow Inc., Richmond, Va.

Meagher said STA strengths in telecommunications provides a real bonus to the company. "It moves SI beyond just IT services and into more telecom work," he said. "They are looking for a significant increase in the business, and bought STA for its IT services just to find that the telecom business was the crown jewel."

SI International is a privately held company, formed in 1998 and backed by the Chicago-based equity investment group Frontenac Co. It made its first acquisition in January 1999 when it bought Statistica Inc., a $20-million-a-year Gaithersburg, Md., company that provides services such as database management and outsourcing.

The company purchased in July 1999 WPI Inc., a $15-million-a-year, Rockville, Md., company that develops online training and other tools to increase performance. Primary customers for both companies are in the federal government.

SI International's third and most recent acquisition was Nov. 30, 1999, when it purchased Noblestar Federal Systems Inc., Reston, Va., a subsidiary of Noblestar Systems Corp. Renamed SI Enterprise Consulting Corp., the new unit focuses on using software products to deliver client-server, enterprisewide technology solutions to its clients.

It could take a few years before it is known whether SI International has been truly successful with its acquisitions, said Kevin Plexico, an analyst with Input Inc., a Vienna, Va.-based market research firm.

"If you need a skill in demand and you don't have it, the best way to go about
getting it seems to be acquiring it
rather than building it. It takes too long to build," said Plexico. "The key is then is to integrate it efficiently, and that's the challenge."

Having formed in late 1998, the company went from no revenue at the beginning of 1999 to $130 million by the end of the year, said Walter Culver, president and chief operating officer of SI International. Culver said the company expects to hit at $150 million this year, with $30 million to $40 million from its telecom work. It has 1,350 employees, including 640 from STA.

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