Steven Myers, and his name, have fallen out of favor with Wall Street. That’s one way to interpret last week’s moves at Newport Beach-based SM & A; Corp., which changed its name, shook up its board and announced the resignation of founder Myers as the company’s CEO.
The company said its new name, Emergent Information Technologies Inc., better reflects its focus as a provider of information technology services and software development for telecommunications and health care. The company also announced that Michael Piraino, its president and chief operating officer, had been promoted to the post of chief executive. Ajay Patel was named COO. The company said Myers, a pilot and aviation expert who owns 44% of the company, will remain chairman.
The moves followed a long decline in the company’s stock. The company went public in early 1998 as Steven Myers & Associate, describing its core business as writing proposals to help big corporations like Lockheed Martin win government contracts. The stock opened at 12 and reached the 30 level by the third quarter of 1998, but it has fallen since. The stock was at the 4 level before last week’s announcement (the stock moved up to 5 1/2 on the news).
In a phone interview, Myers said he’ll stay active in the company, but focus on longer-term strategies and client relationships.
Emergent also is reshaping its five-member board into a seven-member group. Gone are James R. Mellor, a former chairman and CEO of General Dynamics, and Malcolm R. Currie, former chairman and CEO of Hughes Aircraft.
Taking their places are Vincent Smith, chairman and CEO of Irvine-based Quest Software Inc. and Luther Nussbaum, chairman and CEO of First Consulting Group, a 2,000-employee IT firm. Also joining the board are John Fuller, founder and CEO of the consulting firm The Monitor Co., and consultant Albert Nagy of the Nagy Group. Remaining on the board are Myers, Piraino and J. Christopher Lewis, general partner of Riordan, Lewis & Haden.
Myers said Mellor and Currie “are wonderful guys but their background was aerospace and that’s not our focus. We’re not an aerospace company anymore, we’re an information technology company.”
“Vinnie is in software, which is where we are. Luther is in IT services, another one of our divisions. Joe Fuller is a very high-end consultant services provider, that’s another segment. These board members are value added,” he said.
Although high tech stocks themselves have been out of favor in recent weeks, Myers said he believed the latest name change would be a boost for the company.
“There is a tremendous demand for stocks to be perceived as high tech,” said Myers. “Ironically, that’s what we are, but to the investor community, we looked like an old economy service company. Emergent is a much stronger name. It better describes what we do. Our employees will be able to use it to better describe what we’re about. It will help our marketing.”
Myers also noted the change in the company’s ticker symbol, from WINS to EITI. “They (the board) all wanted to change the symbol. The board felt WINS was pandering to the Street,” said Myers.
Emergent has expanded rapidly, increasing its revenue threefold in three years. But in the process, its margins have declined and its long-term debt has tripled. The company restated its earnings in 1999, shrinking the bottom line.
Along with the other announcements last week, the company reported its results for the first quarter: Revenue grew 25% to $31.7 million, but profits declined 79% to $630,000.
But Myers said the company remains more interested in growth than in profits, and he doesn’t think that’s a problem for investors. He noted that the company had record earnings and revenue in last year’s first quarter, but the stock declined.
“That said the investor community just didn’t care. We just weren’t attractive to them,” he said. He said he’s expecting $140 million in revenue this year and said the company will need the “infrastructure improvements” to support that. Rather than try to maximize earnings, the company will have “a sensible allocation.”
“When the stock tanked, we basically had to reassess the whole approach to our business. The stock was worthless as a currency to make acquisitions. It’s obvious that producing EPS won’t make us an attractive stock.”
With all the changes, Myers is seeing his initials go away for good. SM & A; is still the name of the principal subsidiary for writing government contract proposals. And he said he doesn’t mind these changes.
“It’s not about me. It’s really about us creating an enterprise based on a vision of providing high value products,” he said.
With the addition of seven companies in two years, Emergent has transformed itself. In addition to writing government contract proposals, it now provides operations management and software for telecommunications companies, medical information management applications for healthcare companies and software algorithms and codes for major commercial and government programs.
Employment has grown from 166 in 1997 to about 850 at present. Myers said that number is expected to reach 1,000 employees by the end of this year.
