Hunt Valley Web company undergoes major overhaul like its client, Orioles
Quantum Net Technologies merges with CBQ to leverage global staff and become player for Fortune 1000 business
By BOB KEAVENEY
Daily Record Business Writer
mddailyrecord.com
Bart S. Fisher, chairman of CBQ Inc., says his objective is to become singularly focused on the development of software and networking products and to establish a team of relatively inexpensive code-writers overseas. Once the company gets there, it can bid more successfully on large contracts at Fortune 1000 companies.
Rather unexpectedly, Hunt Valley-based Quantum Net Technologies all of a sudden has quite a lot in common with one of its high-profile clients, the Baltimore Orioles.
Like the professional baseball team, Quantum decided in recent months to go in a new strategic direction in hopes of becoming more competitive. And like the Orioles, Quantum — a developer of Web-based products — has been working furiously since the end of last summer to make the change.
Since merging with CBQ Inc. of Addison, Texas, in August, the new company has shuffled its management team, jettisoned business units through sales and shutdowns, added new ones through acquisitions, shifted its corporate headquarters from Dallas to Maryland and is venturing to strengthen its connections with partners in China.
The goal behind every move is for CBQ and its subsidiaries, which includes Quantum, to become singularly focused on the development of software and networking products to establish a team of relatively inexpensive code-writers overseas. Once it gets there, it can bid more successfully on large contracts at Fortune 1000 companies.
“We’re tired of losing contracts by $10,000,” said Bart Fisher, chairman and chief executive of CBQ. “You just have to bid lower. … There <are> too many companies out there that say they do what we do. We need to distinguish ourselves, and we think we can do that with the China synergies.”
Unlike the Orioles, CBQ’s success will be measured not in wins and losses, but rather in dollars and cents.
Parental help
CBQ acquired Quantum Net, the Baltimore area’s third-largest provider of e-commerce services, last summer for stock valued at about $10 million. Today the stock is worth about $3.3 million. The local concern agreed to the deal in hopes of leveraging its new parent’s relationship with China Soft, a software development company whose employees the combined company would use to perform the hundreds of hours of tedious code-writing necessary on larger jobs.
Quantum Net’s large competitors commonly use overseas workers, usually in East Asian nations such as India, to perform such duties in order to take advantage of much lower labor costs.
James Moran, who at the time of the deal was Quantum Net’s president, said then that the goal of the merger was to build the local concern into “a larger company,” working on “larger projects <in> bigger markets.” Moran has since been named president of CBQ.
In addition to China Soft, CBQ owns China Wireless, an early-stage telecommunications company, and China Partners, an exporter of industrial goods that hopes to build an Internet portal to help facilitate trade between China and U.S. companies. Fisher, who in addition to his chairmanship of CBQ is a Washington-based consultant to the Chinese government on trade matters, said CBQ is attempting to sell the latter two businesses, both of which are unprofitable and non-core.
Should those sales be made and the acquisitions completed, Fisher estimates that his company will have annual revenue of about $40 million and black ink on its bottom line.
In addition, he is considering accepting one of several offers for investment, including one $5 million offer from a New York venture capital firm that he declined to name for the record. Such a deal would help solve CBQ’s primary financial problem — a lack of cash flow, which complicates the company’s acquisition plans — but it would come with strings attached.
“We’re daily getting calls from people who want to put money into the business, but of course we have to weigh how much equity we want to give away,” he said. “We’d rather just get a line of credit.”
Faster, stronger
To achieve the company’s master plan, CBQ’s officials are working on several fronts. For example, CBQ is in the process of negotiating an investment of between $5 million and $10 million from a Chinese concern, which it hopes to secure by the end of the quarter.
Also, the company is trying get out of non-core business lines locally and in China while adding new partners in the United States and in China and India. And, finally, CBQ execs hope to close on two acquisitions by the end of 2001.
“The plan is to streamline and focus the company on software development and networking. We’re trying to <leverage> the China connection we have,” Fisher said, adding that he and Moran had just returned from Beijing. “And we’re very close to closing on several acquisitions <in the U.S.>, hopefully by the end of the year.”
The acquisition targets are a formerly high-flying Virginia-based software developer that has hit hard times but has valuable relationships in India and a roster of American clients, and a Miami software developer. Fisher declined to name the companies for the record; he said he is trying to persuade principals at both firms to accept all-stock transactions, as Quantum did in August.
Despite CBQ’s stubbornly low stock price, which last week traded at less than 30 cents a share and has not seen the sunny side of $5 since April, Fisher is confident that at least one of the firms will accept the offer by year’s end, and that the other will come around eventually. He acknowledged that one of the companies is seeking cash as well as stock and that the demand “is an issue,” but said it is “not a deal-breaker.”
“Once we make these acquisitions, we’ll be looked at as a comer,” he said, a reference to CBQ’s low stock price. “We are a growth story in the Baltimore-Washington region, and one that really hasn’t been told. We need to do a better job of telling our story, and when we do, we’ll do better in the market.”
CBQ sold two unprofitable businesses in Texas to employees following its merger with Quantum Net, thus ending its presence in the Lone Star State and signaling its headquarters shift to Hunt Valley. The results of those businesses, however, put CBQ in the red for the first nine months of 2000, when it lost more than $1.7 million, or 3 cents a share, despite increasing revenue by 321 percent (thanks in large part to the Quantum Net deal) to $7.84 million.
CBQ also cut some expenses by downsizing Quantum Net in some areas, though it is adding some technical staff in others. “We’ve made it leaner and meaner,” Fisher said.
In its third-quarter filing, the parent acknowledged that Quantum Net, too, lost money during the first three quarters of the year, but it blames the loss on several non-core lines that it is exiting. Quantum Net’s core business of building Web products for companies — the business the parent is realigning itself to focus on exclusively — had a profit margin during the period of 4 percent.
Working almost entirely for clients in the Mid-Atlantic, Quantum Net had 1999 revenues of about $12 million.
Play ball
The 70-employee Quantum Net is probably the only one working for Peter Angelos, Art Modell and Donald Trump simultaneously.
Quantum Net this spring built a Web portal for the Orioles, through which the club’s scouts can keep better track of prospects, get detailed statistical information and game logs, and file reports.
“You can query the system in almost any way you can imagine,” said Jim Kline, the Orioles’ director of information systems. “If you’re looking for left-handed pitchers, you say, ‘Show me the left-handed pitchers.’ If you’re thinking of doing a trade with the Atlanta Braves, you can say, ‘What do we think of the Atlanta Braves’ players?’”
Scouts have long used computers for such purposes, but Kline said the Orioles’ new system is far more advanced — its database is richer, and information is easier to extract. The project required a total rewrite of the system’s code, and Kline was impressed with Quantum Net’s quick project.
“They had to do it in a very tight time frame,” he said. “I think they wrote the whole thing in about six months.”
Quantum Net also is designing a network infrastructure for Trump Properties’ Atlantic City Casinos. And it provides Web services for the Baltimore Ravens.
==================================== End
CIIR
:=) Gary Swancey |
