Contractors Combine to Become Nextira Federal

Contractors Combine to Become Nextira Federal

Steve Snyder

An equity group that has been snapping up technology companies in recent years has created what industry analysts think could be a major new player in the government market for converged voice, video and data networks.

Nextira LLC, a company with $1.3 billion in annual revenue, was created in April by Platinum Equity of Los Angeles when the investment group pulled together TimePlex Federal Systems and Williams Communications Solutions LLC.

The government operations of TimePlex and Williams have been merged to form Nextira Federal, a federal subsidiary based in Fairfax, Va. The new government telecommunications contractor will provide converged voice and data solutions to civilian and defense agencies in the federal government.

Nextira Federal has roughly $50 million in annual revenue, said Steve Snyder, former head of TimePlex and now president of the new government business.

Nextira's parent, Platinum Equity, has acquired more than 25 technology-driven companies since it was founded in 1995. Platinum purchased TimePlex in 1999 and consolidated it with Milgo Solutions, which it already owned.

"In late '99 or early 2000, they started to look at the federal piece, to move from being a manufacturer of proprietary systems to [providing] services," Snyder said.

"Our legacy is data," Snyder said, referring to TimePlex. "The Williams legacy is clearly voice systems."

Customers of both companies had begun to ask why they needed two networks, so Platinum went looking for an acquisition to bring about a unified solution, he said.

The private equity firm announced in January 2000 it would purchase Williams Communications; the acquisition was completed two months later for a price of about $400 million, Snyder said.

Being part of Platinum Equity means Nextira will continue to scout for acquisition opportunities, Snyder said, "because they're always looking." He said the company would be more likely to consider complementary opportunities, rather than pursue similar companies that provide growth for its own sake.

The advantages of the merger are significant, Snyder said, especially because the customer base didn't overlap. TimePlex was strong in defense agencies, while Williams had a presence in civilian agencies.

As a result, "they've put themselves in a very nice spot in the market," said Jim Kane, president of market research firm Federal Sources Inc., McLean, Va. The combination of the two companies has put the equipment part together with engineering, furnishing, installing, maintaining and operating an integrated network for voice and data, he said.

"They've positioned themselves to provide full service for those folks who want a degree of customization in their networks," Kane said. "They'll take care of the whole thing for you. ... They really provide the full life-cycle support."

Telecommunications analyst Warren Suss, president of Suss Consulting Inc., Jenkintown, Pa., agreed with Kane's assessment, noting that both TimePlex and Williams Communications had solid installed bases in federal agencies.

"They [are] probably the top distributor for Nortel. They also have a strong embedded base for the other switch vendors they represent, particularly NEC as a low-end vendor," Suss said. "So they have a good base of federal users to build on. I think they can play off that. Plus they have introduced ... some strong next-generation integrated solutions that play in voice, data and video."

Snyder said the company recognizes that its customer base is an important asset.

"We have not abandoned our longtime, long-term customers," Snyder said. The government continues to have a significant investment in legacy systems, and Nextira Federal will continue to maintain, as well as work to transform, those systems, he said.

"The taxpayer can feel good that the federal government, when it buys something, will wring every bit of life out of it," Snyder said. On the other hand, "the government is going to push you to the edge on technology."

One challenge facing the new company is integrating the two entities. "Williams was so decentralized," Snyder said.

Integration is further complicated because the smaller company, TimePlex, is acquiring a larger one, Suss said.

"That's a significant challenge, to manage that successfully," he said.

The second issue is the potential for channel conflict, he said. While Nextira Federal is positioning itself as a vendor-neutral provider, there is a manufacturing legacy from TimePlex, which offered its own line of multiplexing equipment.

Companies with a manufacturing arm have a tendency to push their own hardware, Suss said, "yet they're trying to position themselves to a degree as hardware-neutral integrators."

The question is whether Nextira can really be neutral or will "they feel pressure to push their own hardware, whether it's the best solution or not," Suss said.

Snyder said Nextira can offer far more value to its customers by constructing the best solutions than by manufacturing "me too" products that echo other companies' offerings.

"We have decades of [experience] providing networks and services to the government," he said.

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