Metro Information Services, Inc. History

Address:

200 Golden Oak Court
Virginia Beach, Virginia 23452
U.S.A.

Telephone: (757) 486-1900
Fax: (757) 306-0251

Public Company
Incorporated: 1979
Employees: 3,148
Sales: $314.6 million (1999)
Stock Exchanges: NASDAQ
Ticker Symbol: MISI
NAIC: 541511 Custom Computer Programming Services; 541512 Computer Systems Design Services

Company Perspectives:

Metro provides a wide range of value-added Information Technology (IT) Consulting and custom software development services through our presence in numerous metropolitan markets in the United States and Puerto Rico. Our experienced Consultants and proprietary systems allow us to deliver high-quality, on-schedule services to our Clients in a cost-effective and efficient manner. Key Dates:

Key Dates:

1979:: John Fain and Chris Crumley establish Metro Information Services, Inc. in Virginia.
1986:: Company is listed on the 'Inc. 500 Honor Roll.'
1991:: Fain purchases Crumley's interest in the company.
1997:: Metro goes public.
1999:: Company completes several acquisitions to expand nationally.

Company History:

Metro Information Services, Inc. (Metro IS) is an information technology (IT) consulting firm based in Virginia Beach, Virginia. As of mid-2000 it had nearly 40 offices located in metropolitan areas throughout the United States and Puerto Rico. Its services include application systems development and maintenance, IT architecture and engineering, systems consulting, project outsourcing, and general support services. The firm supports all major computer technology platforms, including mainframe, mid-range, client/server, and network environments. As with many other IT consulting firms, Metro IS is shifting toward offering more Internet-related services, as demand for systems to support consumer and business-to-business electronic commerce continues to grow.

Internal Growth of a Private Consulting Firm: 1979--96

Metro Information Services, Inc. was incorporated in 1979 in Virginia as a private company. It was founded by John Fain and Chris Crumley in Virginia Beach, with Fain specializing in the technical side and Crumley the marketing side of the business. They began as a partnership, working out of Crumley's house and hiring out employees to do systems analysis and programming for large banks and manufacturing firms. Within four years the company had opened offices in Norfolk and Richmond, Virginia, and Raleigh, North Carolina. By 1985 they had 125 employees in six cities and $5 million in revenue.

Each new office was set up as a separate, decentralized profit center rather than as a branch office. At each new office, two codirectors--one technical, one a marketing specialist--were responsible for generating business and revenue. The only control exercised by the home office involved personnel and administrative policies.

Metro IS was able to attract customers by generating employee enthusiasm and creating a service mentality toward its clients. The company's employee-motivation techniques stressed teamwork and customer service. Rewards included a profit-sharing plan, an extensive education program for employees, and use of the company's mountain condo. Metro IS was one of six privately owned companies named to the 'Inc. 500 Honor Roll' by Inc. magazine in 1986.

By 1994 Metro IS had 16 offices and 838 full-time consultants. Most of the offices were located in major southern cities. In 1995 the company expanded beyond its regional boundaries and opened offices in Chicago, Cincinnati, Philadelphia, and Phoenix. By the end of the year Metro IS had 20 offices. Revenue was around $85 million a year, and the company had 1,300 employees. Fain was president, CEO, and majority owner of the firm, having bought out Crumley's interest in 1991. Fain wanted to build Metro IS from a strong regional company into a nationwide provider of IT services. Major corporate clients included AT & T, Citicorp, Motorola, and Walt Disney. Its two largest clients, Newport News Shipbuilding and Northern Telecom, accounted for about four percent of the firm's revenue.

Growing Through Acquisitions: 1997--2000

Metro IS went public on January 29, 1997, with an initial public offering of 3.1 million shares of stock at $16 per share. Net proceeds to the company were $33.1 million, which were used to pay off the firm's debt and finance acquisitions. At the time Metro IS had 1,500 employees in 24 offices, the most recent opening in Denver. After going public, Metro IS began a series of acquisitions. Its first and second acquisitions took place in July 1997. Metro IS acquired Data Systems Technology, Inc., for $498,000, which gave it offices in Columbia and Greenville, South Carolina. It also acquired J2, Inc., of Kansas City, Missouri, which was doing business as DP Career Associates, for $5.2 million. In December 1998 Metro IS gained an office in the Palo Alto/Silicon Valley area of California, through the acquisition of The Avery Group for about $11.8 million.

From 1997 to 1999 Metro IS's client base grew from less than 400 clients to nearly 800 clients who each generated at least $25,000 in annual revenue. These clients were spread across several different industries, including banking, communications, financial services, healthcare, manufacturing and distribution, government, technology, and transportation.

Further acquisitions in 1999 resulted in new offices in Irvine and San Francisco, California; Camp Hill (Harrisburg), Altoona, and Pittsburgh, Pennsylvania; Charlotte, North Carolina; Hagerstown, Maryland; Kansas City, Missouri; Washington, D.C.; Baltimore, Maryland; and Dallas, Texas. These acquisitions included D.P. Specialists, Inc. for $18.8 million; The Professionals-Computer Management & Consulting, Inc. and Krystal Solutions, Inc. for $18.5 million; Solution Technologies, Inc. for $28.4 million; and Acuity Technology Services, LLC for $40.2 million. At the end of 1999 Metro IS had grown to 45 offices located in 21 states and Puerto Rico and more than 2,700 full-time consultants.

During 1999 Metro IS, along with other IT consulting firms, experienced a slowdown in demand for IT services, mainly affecting mainframe computer systems. Clients were reluctant to start new IT projects in light of potential year 2000 problems. As a result, many mainframe consultants left the company to seek other opportunities. While demand for client/server, network, and Internet-related projects remained high, it was not enough to offset the loss of mainframe consultants. This caused Metro IS to report lower than expected earnings in the second half of 1999, which continued into the first quarter of 2000.

Revenue for 1999 increased 47 percent to $314.6 million, up from $213.9 million in 1998, due largely to acquisitions. Net income was relatively flat, increasing 3.6 percent from $14.6 million in 1998 to $15.1 million in 1999. Net income was affected in part by a net interest expense of $2.9 million in 1999.

As of March 2000 Metro IS had 46 offices in 44 metropolitan markets in the United States and Puerto Rico. Of the firm's 3,148 employees, 2,600 were consultants, approximately 1,600 of which were salaried. Since 1994 the firm had grown at a compound annual rate of 36 percent.

Later in the year, though, Metro IS closed eight of its smaller offices and announced it might release 65 employees, including 40 consultants and 15 office workers. The planned closures were located in Memphis, Milwaukee, Minneapolis, Orlando, Pittsburgh, Portland, Sacramento, and Salt Lake City. Those offices together contributed less than 1.5 percent of Metro IS's revenue in 1999. The closings were not a cost-cutting measure; rather, it was the company's intent to focus on core markets as its business emphasis shifted to electronic commerce.

Metro IS continued to benefit from a strong economy, increased use and reliance on information technology (IT), significant changes in computer technologies, the growth of client/server environments over centralized mainframe computer systems, and a trend among U.S. companies to outsource IT projects. For 2000 Metro IS's strategy was to shift its employees toward Internet, client/server, and network skills that would support an Internet-based economy. The firm wanted to take advantage of the significant shift toward using the Internet for consumer and business transactions and the growth of electronic commerce. The company also planned to open fewer offices in order to concentrate its resources on training its workforce in Internet-related skills and increase its solutions capabilities. It planned to continue to grow through selective acquisitions.

In 1999 and 2000 the company experienced a shortfall in earnings as it missed analyst estimates for three straight quarters. Its stock fell from a high of nearly $28 in January 2000 to less than $10 in mid-year. Revenue shortfall was attributed to training costs and lower revenue caused by the transition from Y2K-related work to e-business solutions. It remained to be seen if Metro IS could recover in 2000 and continue the strong growth it had recorded for much of the 1990s.

Principal Competitors: Andersen Worldwide; Cambridge Technology Partners, Inc.; Computer Horizons Corp.; Computer Sciences Corp.; Keane, Inc.

Metro Information Services, Inc. History

Company Perspectives:

Key Dates:

Company History:

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