Like many company presidents running successful VAR organizations, Tom Velez thought long and hard about taking his company, Computer Technology Associates Inc. (CTA), public.
In 1996, Bethesda, Md.-based CTA boasted a satellite communications operation that was literally and figuratively worlds away from what the company does today. Now CTA specializes in software applications and database integration as a narrowly focused, specialty business.
Back then, Velez, CTA's founder, decided to take the diversified computer company public. He lined up finances, hired bankers and submitted the proper documents with the Securities and Exchange Commission. He even made plane reservations for trips to New York to meet with Wall Street securities companies.
The night before beginning his road show, Velez got a phone call no business owner with dreams of an IPO wants to get. Underwriters said investor enthusiasm was not high. Wall Street was put off by the company's business model, which leveraged two different operations: IT services, and space and telecommunications.
"It was an odd mix for Wall Street," says Velez, who decided to shelve his IPO and forgo what would have undoubtedly added millions to his personal net worth.
Soon thereafter, Velez made a strategic decision to simplify his company's focus, which had since wandered from its early software development consulting emphasis. That meant selling the space and telecommunications business, which had grown from $15 million in annual sales to $115 million in a few short years.
That's as much total revenue as the company generated in all of 1998. But Velez has no regrets. He's on track to generate as much as $140 million in sales this year and has grown his IT services business into an 800-person organization. Despite that, Velez says the company continues to hone its focus. And so, once again, it may be time that CTA tests the IPO waters.
CTA continues to refine its focus, providing rapid legacy applications redevelopment that includes Y2K remedial work. It also provides enterprise resource planning implementation and data warehousing services.
"There was a time when diversification was attractive. Today, focus is more highly valued," says Velez. "We used to say, 'We do best of breed.' It served us well. We got that [message] across. But the wealth of investment that it takes to become good means you can only afford to invest in so much training and vendor analysis. Now, we're looking at two, possibly three, strategic relationships. Oracle is one."
Time will tell who the others are, and whether CTA's attempts at going public will fare better the second time around.
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