Dunn Computer acquires IDP in $23M cash/stock deal

In a move intended to strengthen its manufacturing operations, Dunn Computer Corp. has signed a letter of intent to purchase former 8(a) contractor International Data Products Corp. for cash and stock totaling $23 million.

IDP, with its PC manufacturing facility in Puerto Rico, will keep its name and become a wholly owned subsidiary of Dunn under the deal, which is expected to be completed in the spring, said John Vazzana, executive vice president of Dunn.

"We believe the two companies will have significantly improved buying power, and that will enable us to build systems more economically," Vazzana said. "That will allow us to pass savings along to customers."

While many vendors are looking at mergers and acquisitions, this acquisition was driven by growth opportunities rather than a need to consolidate, said George Fuster, president of IDP.

"There's been an awful lot of consolidation, [but] that's not the driving force here. Both of us are in a growth pattern. We are not in a merge-and-cut mode," Fuster said.

Fuster and his brother Oscar, who is executive vice president of IDP, will receive stock options and seats on Dunn's board of directors under terms of the sale. The rest of IDP's management will remain intact with the same functions as before, George Fuster said. No layoffs are anticipated.

The two companies will have a total work force of 380 people and combined revenue of nearly $100 million based on 1997 revenue mostly in sales of desktop and portable PCs, and network servers to federal and state governments.

IDP was second in portable PC sales to the government and ninth in desktop sales in fiscal 1996, said Payton Smith, a research analyst at IDC Government, Falls Church, Va. "IDP has pretty significant presence through big contract vehicles that have paid off very well," Smith said.

IDP recently won a product leasing contract with the Navy's Atlantic Fleet that includes computers and networking equipment. The company, which left the 8(a) program in December, also holds the 8(a) portion of the Air Force's Desktop V program and a Justice Department contract for notebook computers.

Ashok Mehan, president of SMAC Data Systems Inc., another PC manufacturer in the Washington, D.C., area, said the move surprised him because it involved a smaller company acquiring a larger company and because Dunn doesn't gain any services or other "value adds" that it lacks.

"To me it's a lateral move by Dunn to have acquired another manufacturer because in this day and age people are trying to buy companies that add value," Mehan said. "I still consider them a formidable competitor in what is a fiercely competitive market."

Vazzana said IDP's technical service group, including on-site regional offices in Chicago and other cities, will become available to Dunn customers, enabling the Sterling, Va.-based company to become more active as a solutions provider. Dunn enhanced its service offering with the acquisition in September of STMS Corp., a provider of networking and systems integration services.

Dunn's government business includes a contract under the Defense Intelligence Agency's System Acquisitions and Support Services II program, a blanket purchase agreement at the Social Security Administration and contracts at the U.S. Courts and the Energy Department.

IDP, a 14-year-old company based in Gaithersburg, Md., recorded a profit of $1.1 million on revenue of $76 million in fiscal 1997.

Dunn had a profit of $1.3 million on revenue of $21 million in fiscal 1997.