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To: Jeff Grossman who wrote (12715)	8/18/1998 1:42:00 PM
From: Narotham Reddy	Read Replies (1) \| Respond to of 13949

8/18 Mastech Expects to Buy 'Several' Companies: Bloomberg Forum New York, Aug. 18 (Bloomberg) -- Mastech Corp., a provider of information-technology services and custom software, is in ''very advanced discussions with several companies'' about prospective acquisitions, said Chairman Sunil Wadhwani. ''We want to add to our technology base'' in the U.S. and internationally, as well as obtain new technologies in electronic commerce and advanced software applications, Wadhwani told the Bloomberg Forum. So far this year, Pittsburgh-based Mastech has bought three smaller companies, two in Australia and one in Canada. All three added customers and market penetration. Though Wadhwani declined to identify targets, he said they would meet those same criteria. ''You'll be hearing from us soon,'' he said. The company has cash and short-term investments exceeding $77 million that can be used for acquisitions. Mastech's ''organic growth'' as well as acquisitions should enable it to report revenue exceeding $1 billion by 2001 mainly by ''adding value'' to solving software and computer problems for more than 500 customers worldwide, the company said. The company reported last month that second-quarter net income rose 50 percent to $5.75 million, or 12 cents a diluted share, including merger charges, from $3.84 million, or 8 cents, a year ago. Revenue rose 66 percent to $92.6 million. ''Our profitability is tremendous,'' said Wadhwani, 45, a mechanical engineer who co-founded the company 12 years ago. But it can do better: The targeted gross margin is 36 percent, compared with 33 percent now, which should yield an operating margin of 16 percent, compared with 14 percent now. ''All our activities are geared towards hitting these numbers,'' the chairman said. Winning More Accounts As it expands, Mastech is winning contracts from more customers, lessening dependence on large accounts like Electronic Data Systems Corp. for revenue. EDS now accounts for ''less than 12 percent of revenue,'' Wadhwani said, compared with 13 percent last year. In general, revenue from its top 10 customers this year will dip to around 35 percent of overall revenue from 45 percent in 1995, he said. Mastech uses ''a mix'' of long-term contracts for accounts like EDS, Coca-Cola Co. and General Motors Corp. to manage software as well as specific, fixed-price contracts to implement an application, the chairman said. The latter is more profitable. Mastech now has about 5,000 employees, with about half at customer sites in the U.S. and the remainder elsewhere, including 500 at three ''state-of-the-art'' software centers in India that are connected by satellite to customers. Indian Engineers Wadhwani, a native of Mumbai, formerly Bombay, said those Indian software engineers are vital. The subcontinent location saves on development costs and also gives Mastech a global presence. Rivals, such as Sapient Corp. and CMG Information Services Inc., vie for contracts but don't have Mastech's international penetration, he said. Rather than hire EDS or IBM Global Services, Wadhwani said, customers hire Mastech to manage a specific project, such as implementing a software application from SAP AG or Baan Software NV, or setting up an Internet marketing system. The company's long-term strategy is to be among ''the top five'' information-services providers in the U.S., Canada and Australia, he said.