Black Box opens in federal market

The name Black Box may not ring many bells inside the Beltway, but the network infrastructure services company has quickly established a presence in the government market.

The firm, based in Lawrence, Pa., bills itself as the world’s largest technical services company, specializing in the design, construction and maintenance of data and voice infrastructure systems. Black Box’s corporate clientele includes Microsoft, for which it wired Xbox Live data centers, and the international news agency Reuters. Black Box generated revenue of $721.3 million in its last fiscal year, which ended March 31.

The company’s public-sector fortunes got an overnight boost from the April 30 acquisition of NextiraOne’s commercial, government and Canadian operations. That purchase, which has propelled Black Box toward the $1 billion revenue mark, brings with it NextiraOne Federal.

Black Box wanted to expand in the federal government space, said Stephen Snyder, president of NextiraOne Federal, which now does business as Black Box Network Services. Snyder said growth through acquisition provides an easier path into the government market than trying to scale the federal walls alone.

Black Box’s interest in government dates back to late 1999 when the company acquired TennMark Telecommunications, a Tennessee-based telecommunications planning and engineering firm. The company had considerable business in the state government arena, Snyder said.

TennMark’s president, Terry Blakemore, now serves as vice president of corporate business development at Black Box. Blakemore manages Black Box’s mergers and acquisitions operation and was attracted to NextiraOne’s federal work, Snyder said.

With its focus on network infrastructure, Black Box can tap into a large and growing segment of the federal market. Defense Department spending on networking equipment will grow from $1.6 billion in fiscal 2005 to $2.4 billion by fiscal 2010, according to Government Insights, an IDC company. The civilian market, meanwhile, will expand from $1.4 billion to $2 billion during that same period, Government Insights reports.

Shawn McCarthy, a program manager at Government Insights, said networking equipment has been among the fastest growing hardware segments in the past five years. In the next five years, DOD spending on networking equipment will grow at a compound annual rate of 8.6 percent, while civilian spending will grow at a 7.6 percent clip, he said.

In purchasing NextiraOne, Black Box acquired a company that was formed by the merger of several smaller firms. In 1999, Platinum Equity Holdings, a mergers and acquisitions specialist, acquired TimePlex Group and followed that purchase in 2001 with the acquisition of Williams Communications Solutions. That same year, TimePlex Federal Systems and Williams Communications combined to create the group that became NextiraOne Federal. TimePlex provided the data networking experience, while Williams Communications contributed voice expertise and its relationships with vendors.

Michael Strange, channel sales manager at Nortel Government Solutions, said Williams Communications was once part of Nortel. As NextiraOne Federal, the company had access to other companies’ equipment, Strange added, but remained loyal to the Nortel brand and eventually became its largest federal reseller.

Against that backdrop, Black Box acquired NextiraOne and NextiraOne Federal from Platinum Equity. Snyder said NextiraOne Federal operates as a wholly owned subsidiary of Black Box.

With the ink barely dry on the acquisition agreement, Black Box’s NextiraOne Federal unit landed one of 10 Army Infrastructure Modernization (IMOD) contracts. NextiraOne Federal held the predecessor contract, the Digital Switched Systems Modernization Program, which came by way of Williams Communications, Snyder said.

Snyder said he anticipates the new contract generating tens of millions of dollars in annual revenue for the company, partly because the scope of IMOD is broader than its predecessor contract was. For one thing, the new contract offers more services, such as site preparation.

“We are clearly banking on doing a lot of IMOD business with the Army over the next few years,” Snyder said.

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