I had a fairly long conversation late last week with Steve Wilk, the
president of TRNT. Although most of the conversation revolved
around the December 9th article in Barrons about the computer-
service industry and was thus not very specific regarding
TransNet, I still gained some additional insights about the
Company, which I will pass on to you, without recounting the
entire conversation.
Our discussion covered the company's client relationships and the
directions in which they are expanding. It appears to me that
TRNT has have gained additional business in the area of network
reengineering, with governmental and educational entities. I also
gained the impression that the company's clients would like it to
have an expanded geographical coverage, so as to meet their
needs in areas other than their NJ headquarters. TransNet does
not publish a client list and rarely puts out press releases about
new client relationships, citing client confidentiality requirements.
The Barrons article heavily covered the consolidation going on in
this industry. As an example of this consolidation, Wilk alerted me
to an article in Computer Reseller Magazine which details the
recently announced strategic plans of Intelligent Electronics Inc.
The following are exerpts from the article, which can be found at
techweb.cmp.com
Intelligent Electronics Inc. will begin acquiring dealers and
enhancing current reseller partnerships in an effort to regain
momentum. While the details of the strategy still are being
finalized, IE President Michael Norris said the goal is clear.
IE purchased a Houston-based reseller in October for an
undisclosed amount. This month the company also acquired
RCK, a large Compaq Computer Corp. education reseller in
Waco, Texas. With these two deals, IE's direct business now
accounts for about 18 percent of its overall revenue, Norris said.
IE needs to beef up its national company-owned enterprise to be
competitive with the likes of Vanstar Corp., Entex Information
Services Inc. and Inacom Corp., Norris said. "We need a brand
presence with IE going forward. We are not in all the markets we
need to be, and we are not at the scale we need to be in order to
be competitive," he said.
Although the acquisition strategy is an offensive move by IE,
Norris said IE also has to protect its base of resellers, who have
been approached by some of IE's competitors.
Although TransNet has a strong relationship with Intelligent
Electronics, I think it is more important to note that there are a
number of companies which are actively acquiring consulting-
based resellers and thus are potential buyers of TransNet, and that
these potential acquirers are actively approaching companies,
such as TransNet, which currently work with Intelligent Electronics.
Although Intelligent Electronics has built up a substantial "war
chest" for this effort, recent announced earnings problems at a
subsidiary may prevent them from continuing to implement this
strategy.
Wilk indicated that the second quarter earnings announcement
would be out in early February, and that the annual stockholders
meeting was being scheduled for late February. Although I
learned nothing specific about the second quarter results, I came
away with the feeling that my relatively conservative forecast of
$19 million in revenues and EPS of $.06/share for the quarter was
reasonable.
When you first see the upcoming press release with its
comparison of the results for this quarter with the prior year
results, please remember that the second quarter of 1996
produced extremely strong results. As soon as I have any
information I will analyze it and send it out to you.
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