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<<<<Business Week: May 31, 1999
Special Report
Mastech Corp.: The Nabobs of Networking
Sunil Wadhwani and Ashok Trivedi got together 13 years ago over a beer to air some gripes about the computer biz. Trivedi, a product manager at Unisys Corp., was irked that his company was trying to shove bulky mainframes down the throats of clients who really wanted networked personal computers. Wadhwani was hearing similar complaints from fellow graduate business students at Carnegie Mellon University. But the pair did more than grumble; by the time they left the bar, they had taken the first steps toward scraping together $100,000 from their life savings to launch a PC-networking-and-services business, Mastech Corp.
Their plan proved farsighted. It took Mastech several years to get rolling after the stock market crash of '87 slowed corporate investments in technology. But since the early '90s, spending on local-area networks, enterprise software, and the Internet has exploded. And upstart Mastech has carved out a chunk of the market against bigger rivals by offering a wide range of services and some of the lowest costs in the business. The result is sales growth averaging 56% a year over the past three years, to $390.9 million in 1998. Earnings grew 26.7% a year, to $33.4 million. That landed Mastech at No. 79 on our Hot Growth list.
For a relatively small player, Mastech has big reach. The company's 6,000 employees are spread over five continents. But Wadhwani, now 46, and Trivedi, 50, avoided the showcase offices and big staffs erected by some large information-technology competitors. Mastech also can beat them on turnaround: Linking its three software-development offices in India to the 400 people at headquarters outside Pittsburgh lets technicians work on a project virtually around the clock.
TOP TALENT. The founders--both immigrants from India--draw heavily on a worldwide tech talent pool. Mastech has been one of the largest users of a program that allows immigration to the U.S. based on technology skills. ''We recruit from everywhere--the Philippines, India, South Africa, America,'' says Wadhwani. He insists it doesn't mean cheap labor--Mastech pays engineers in their twenties and thirties $65,000 a year.
A blue-chip roster of clients ranging from Citigroup to Merck use Mastech to set up and service everything from resource-planning software to data-warehousing projects. ''They have one of the broadest service offerings of the IT companies--and a global presence,'' says Thomas F. Neuhaus, an analyst at Scott & Stringfellow in Richmond, Va. Still, like other tech-service outfits, Mastech has feasted for the past two years on fears of the Millennium Bug. Earlier this year, investors worried Y2K business was drying up. Between late February and mid-March, Mastech's share price fell from 25 to 12. Mastech says it gets only 8% of its revenues from Y2K work and that Wall Street overreacted.
In recent weeks, the stock has recovered to around 17, boosted by first-quarter sales growth of 45% and gains in new lines such as E-commerce. Sales growth should average 35% for the next few years, says analyst James Sober of the investment firm Emerald Research, which has been snapping up Mastech shares. His only question is whether Wadhwani and Trivedi can stay on top of their fast expansion. These days, with no letup in sight from their 80-hour work weeks, the two entrepreneurs have precious little time to grab a brew.
By Peter Galuszka in Oakdale, Pa.
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