GTSI begins assimilating BTG product business, employees

Government Technology Services Inc., armed with 166 new BTG employees and BTG contracts, believes it is ready to pursue the high volume of sales that are needed to make a profit in the fiercely competitive government reseller market.

The tumult of the past two months behind it, GTSI now is focusing on its No. 1 challenge: making sure all BTG customers feel comfortable with the change, said Dendy Young, president and chief executive officer of GTSI. ''There's no room for business slackening. It's a very aggressive free market," Young said, speaking in an interview last week in his third-floor office at the company's Chantilly, Va., headquarters. "I could list a dozen, if not hundreds, of competitors."

The new employees already have been trained and have assimilated, Young said. "Frankly, I believe there's not much of a difference between cultures" at the two companies, Young said. "They are walking into an organization that has a pretty set way of doing things, and once they've learned, then they have what they need. ''The transition was eased by the fact that GTSI never perceived BTG as its archenemy, Young said. "When we got real people talking to real people," any animosity dissolved.

"The first day was a little like the first day back at school. Everyone had to find a new desk in a new place,'' Young said. However, cooperation has been the key to working out any issues. BTG will add its president, Ed Bersoff, to the GTSI board. A current member of GTSI's board, John Toups, has been designated by Young and Bersoff to represent the interest of BTG stock owners.

Young said it was a blessing that GTSI's purchase of BTG's reseller division took place during the slow part of the government buying season and after the company had made significant commitments to its infrastructure.

For example, GTSI has a 200,000-square-foot, 1-year-old warehouse that includes space needed to carrying out configuration, testing and assembly. The new total of 526 employees also means GTSI will not be able to compete as a small business. The company does not yet know what long-term effect that change may have on revenue.

The first big task was to take care of the backlog of orders that had built up during the transition. Shipments were frozen for six days to enable a clean transfer of account information— including information about special pricing and contract details— into GTSI's system, Young said. Once those shipments clear, the company will focus on building its relationships with new vendors such as Cisco Systems Inc., which BTG had represented.

Young said the GTSI sales representatives dealing with Cisco were "off and cooking" to work out any Cisco customer issues.

A Positive Reaction

Analysts have reacted positively to the sale of BTG's reseller division to GTSI, a transaction that was announced in December.

''I think the BTG transaction was very good for both companies," said William Loomis, an industry analyst at Legg Mason Inc. "[Young] has put in a lot of effort into building up the infrastructure to support, basically, a high volume of product, and in the PC-oriented and microcomputing area you have to have a very low-cost structure, and that's been his big focus in the past two years. It's in place now just in time."

Despite the promise, GTSI last week recorded disappointing results for 1997. The company lost $5.1 million, or 76 cents per share, last year. That follows a loss of $17.8 million, or $2.67 per share, in 1996, the company said in a statement.

Putting a positive spin on the results, Young said it appears GTSI has been able to "arrest" the slide in revenue and gross margins that was characteristic of the past five years. He said the company in 1997 was able to stabilize its financial position and strengthen the management team, and these factors facilitated the BTG acquisition.

Young said direct-sales companies will continue to pressure government resellers, who will hold their market share only by offering more variety and services than companies that sell direct. And as long as new products that require those extras continue to be introduced, GTSI has a bright future, Young said.

''If Silicon Valley stopped putting out innovations, we'd probably be out of business," he said.