National TechTeam, Inc.

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National TechTeam, Inc.

27335 West Eleven Mile Road
Southfield, Michigan 48034
U.S.A.
Telephone: (248)357-2866
Toll Free: (800)276-8524
Fax: (248)357-2570
Web site: http://www.techteam.com

Public Company
Incorporated: 1979 as Computer Trade Development Corp.
Employees: 1,500
Sales: $124.16 million (2000)
Stock Exchanges: NASDAQ
Ticker Symbol: TEAM NAIC: 541519 Other Computer Related Services; 541512 Computer Systems Design Services; 61142 Computer Training

National TechTeam, Inc. provides computer services for Fortune 1000 companies in North America and Europe. A large portion of the company’s revenues come from its help-desk centers, where TechTeam staffers answer technical questions for clients’ customers over the telephone and via the Internet. TechTeam also provides corporate computer training and other computer consulting services. The company’s clients include automakers Ford and DaimlerChrysler, Liberty Mutual Insurance, the European Commission, and many others. After a period of explosive growth during the mid-1990s TechTeam saw its revenues drop, and the company recently has been working hard to streamline operations and refocus on its core strengths.

Beginnings

National TechTeam was founded by a Michigan dentist named William Coyro, Jr., in 1979. Coyro, who was born in Detroit in 1943, attended the University of Michigan and then the University of Detroit Dental School, where he graduated in 1969. Following service as a dentist in the U.S. Navy, he opened an office in the Detroit area. An active investor in technology stocks, in 1979 Coyro decided to become directly involved in the field by forming a company called Computer Trade Development Corp. The new company was not active initially, but in 1982 Coyro sought out investors to back a plan to market personal computers built by Solid State Technology, a firm in which he had invested. A number of his friends put $10,000 each into the endeavor. Computer Trade Development Corp. soon began marketing Solid State computers to local customers, including Ford and Chrysler, but the computer maker went out of business not long after. By this time, however, Coyro also had linked up with Fortune Systems of California and had taken an order for 5,000 of its Unix-based personal computers from Ford.

Computer Trade Development Corp. continued selling computers throughout the mid-1980s, and in 1987 the company’s directors decided to offer training and support services for corporate PC users as well, much as Electronic Data Systems did for mainframe computer users. A merger with the publicly traded MegaVest Industries was effected, and the company’s name became National TechTeam, Inc. Calvin Fox, an experienced investment banker from Los Angeles, had facilitated the deal and gained 10 percent ownership of National TechTeam in the process. In 1988 a merger with Far West Ventures of Costa Mesa, California brought more experienced management on board, including former TRW executive Rowland Day, who took on the CEO and president duties from Coyro. The company’s founder continued to serve as board chairman. National TechTeam gave Far West 21 percent of the company’s 5.2 million shares of stock in the deal.

TechTeam’s entry into the computer training field was jump-started when the firm won a contract from Ford Motor Company to perform all of the automaker’s North American computer training. The magnitude of the three-year contract required TechTeam to invest $3.5 million into equipment and staff development, which forced it to operate in the red for several years. When the resultant string of quarterly losses were reported, TechTeam’s stock price withered, eventually hitting a low of 59 cents. Coyro and the rest of the company’s board were receiving stock options in lieu of pay, a move that would benefit them in the future, but which was less appealing in the short run. The company’s founder was forced to continue working as a dentist evenings and weekends so that he could pay his family’s bills.

Once the Ford contract was under way, other companies began to discover National TechTeam. Another early client was Uniplex Business Software, which engaged the company to train commercial end-users of that firm’s Unix-based products. TechTeam subsequently opened several offices around the United States to augment its Detroit-area operations center. During this period the company also began development of what was dubbed ActionTrac, a software program that tracked computer system usage and problems. ActionTrac addressed the concerns of many companies that were implementing new, untested software systems that often failed to operate as promised or had inadequate technical support. With it, information systems managers could evaluate the long-term effectiveness of new systems they were installing. TechTeam staff helped operate the ActionTrac system.

In 1990 TechTeam announced a merger with Royalpar Industries, Inc., but this fell through prior to completion. Rowland Day also left the firm, turning the reins of power back to Coyro. The job of president was filled in the fall of 1992 by Ronald Laubert, director of business development for TechTeam. The 1992 fiscal year was the company’s best ever, with profits of $766,000 on income of $10.9 million. TechTeam’s revenues had shot up nearly 40 percent from the previous year, which had seen profits of only $57,000. During this period contracts were signed with a number of major companies, including Chrysler Corp., Blue Cross/Blue Shield of Michigan, and U.S. Leasing International.

Discovery of a New, and Needed, Service in 1993

In April of 1993 the company began working for software maker WordPerfect Corp. to run a supplementary telephone support center for users of that company’s products. WordPerfect itself would handle 65 percent of the calls, while TechTeam took on the remainder. The company gave its employees 20 hours of WordPerfect training, after which they took a test that verified their mastery of the software. TechTeam already had supplied other services to WordPerfect as an outgrowth of its Ford work, as Ford was then WordPerfect’s largest customer. The new phone center sideline proved a success, and other corporations, including software maker Corel, soon called on TechTeam for similar services.

TechTeam expanded into Europe in the fall of 1993 when it formed a subsidiary called TechTeam Europe, Ltd. The Brentwood, England-based operation was opened, in large part, to offer continuity of service to TechTeam’s American clients who operated in Europe. Later in the year the company acquired a Chicago-based computer services firm called Micro Systems Group in a stock exchange transaction.

The new subsidiaries and the rapidly growing telephone call center operation helped keep National TechTeam on the fast track for growth. By the end of 1993 the company had more than 400 employees, nearly double the number of just nine months earlier. TechTeam’s staff was training more than 54,000 computer users a year and handling 8,600 technical support phone calls a day. Ford Motor Company remained the company’s top customer, accounting for 60 percent of revenues. Half of TechTeam’s total income now came from its computer contract service division, which provided phone helpline, PC networking, database development, and other hardware and software administration services. Another 40 percent was derived from the documentation and training division, and 10 percent came from hardware and software sales. Revenues for 1993 had nearly doubled from a year earlier, topping $20 million, and net earnings were up a similar percentage.

Rapid Expansion Continuing in the Mid-1990s

The company’s growth continued to soar during the mid-1990s. Customer support call centers were set up for Hewlett-Packard and Micrografx, and additional business came from established customers such as Chrysler Corp. and the Prosecuting Attorneys Association of Michigan. To avoid the potential disaster of overextending its reach, the company invested in new systems and hired new staff at a pace that anticipated, rather than reacted to, new business.

In August of 1995 TechTeam signed its biggest contract ever, a $10 million deal that called for it to double the size of Hewlett-Packard’s existing customer support call centers. Revenues again increased more than 100 percent during 1995, to $42 million. The new focus on telephone support services had helped the company reduce its percentage of Ford-derived work to less than half of total revenues. Other major customers included Corel Corp., which was responsible for 12 percent, Chrysler, with nearly 11, and WordPerfect, with 7.5.

In early 1996 TechTeam purchased New Jersey-based Coup, Inc., which offered training services for major corporations like AT&T and Hewlett-Packard. Also during the year a new call center was completed in Detroit suburb Harper Woods, and the company’s Southfield, Michigan center was expanded significantly. A total of 1,038 phone stations were available at these sites. TechTeam also opened a new call center in Brussels, Belgium to perform European helpline work. A joint venture with Paratel NV, called National TechTeam Europe NV, was set up to handle the anticipated multilingual/multinational calls.

Company Perspectives:

Our Mission is: To be recognized as a premier provider of knowledge management solutions. We will achieve this by analyzing the information gathered through our services to drive process improvements that make our clients more efficient and profitable.

The company’s growth was finally getting noticed on Wall Street, and the stock price surged to $27 a share in September, up from under $5 in March. Three million new shares were soon issued, joining the 11 million already in circulation. In October, TechTeam acquired USA Computer Training Centers of Boston, which offered training services in Massachusetts. The company also acquired a Nebraska-based Internet and telecommunications firm, WebCentric Communications, Inc., for nearly $7 million in stock and cash at the end of 1996.

In early 1997 TechTeam announced that it would hire 100 new people a month during the year to staff its still-growing call centers. The company’s 1,500 employees would nearly double in number by year’s end. Call center services continued to provide nearly half the company’s revenues, which climbed steeply again during 1996 to $69 million. In the late spring of 1997 yet another acquisition was made, that of Drake Technologies of Warren, Michigan. Drake was a provider of telephone voice-response services. Shortly afterward a New Jersey company, Compuflex Systems, also was purchased. It was later renamed National TechTeam of New Jersey, Inc.

The Bubble Bursting in 1997

In July of 1997 an article appeared in the investor’s publication Barron’s, which alleged that National TechTeam had used a loophole in accounting rules to overstate earnings for the end of 1996 and the first quarter of 1997. The company’s stock tumbled, losing a third of its value almost immediately and continuing to decline as the year wore on. A shareholder lawsuit soon followed, charging that company executives had sold off large chunks of their own holdings while artificially inflating the price by overstating earnings figures. TechTeam denied the accusations, vowing to vigorously fight the charges in court.

The year 1997 proved to be difficult for the company. In addition to the allegations of fraud, which led the Securities and Exchange Commission to ask TechTeam to restate its quarterly earnings reports, the firm’s growth curve had finally peaked, and the company posted losses of $1.9 million for the year. CEO Coyro attributed the poor showing to a number of unprofitable contracts, which he said were already being supplanted by more favorable ones.

To help right the ship, in early 1998 TechTeam brought in a new president and chief operating officer, former Chrysler Vice-President Harry Lewis, and also completed a 1.5 million share stock buyback program. TechTeam also acquired Capricorn Capital, a high-technology leasing and financing firm, and bought out its partner in the Belgian call center venture.

The year 1998 saw improvements in TechTeam’s operations, and at the end of the year Lewis was moved up to CEO. Shortly after his promotion, the company settled the shareholder lawsuit for $11 million. The payment was covered by insurance, but TechTeam took a $3.3 million hit for lawsuit-related expenses, which helped put annual losses at $3.8 million. More accounting troubles surfaced in early 1999 when the company again was asked to restate an earnings report that had un-derreported losses. New measures were put into effect to reduce the possibility of future accounting problems.

A Return to Form in 1999

During 1999 TechTeam expanded its services overseas, forming TechTeam Europe GmbH to operate in Germany. The company also created the Network Consulting Services Group to offer a variety of network-related services, and opened a new call center in Davenport, Iowa to provide services for a maker of agricultural equipment. TechTeam reported its first profitable year since 1996, earning $1.5 million on $133 million in sales. A restructuring also increased the firm’s emphasis on customer satisfaction and internal communication.

TechTeam continued to see financial improvements during 2000 and also began to focus more heavily on providing Internet-based support services. A new contract with the European Commission, the policy-making body of the European Union, saw the company’s staffers answering questions posted to the Union’s web site. TechTeam also hired RCG Capital Markets Group in February to help boost its sagging stock price and improve relations with investors. Shortly afterward company founder William Coyro resigned as board chairman, a move that was hailed by some as necessary for the restoration of investor confidence. Coyro planned to continue to work for the company in a lesser capacity.

A joint venture with General Electric, GE TechTeam L.P., cost the company more public relations points following the closure of its Sault Saint Marie, Michigan call center and layoffs of 213 employees. Once again the company was forced to revise its quarterly accounting statement when the written-off losses proved to be underestimated. At the end of 2000 the company named M. Anthony Tarn president and CEO, replacing the retiring Harry Lewis. Tarn had worked earlier for The Genix Group, a data management company.

Key Dates:

1979:: Dentist William Coyro, Jr., forms Computer Trade Development Corp.
1982:: The firm begins marketing personal computers with help from new investors.
1987:: Merger takes the company public and changes its name; a new focus is placed on training services.
1988:: Receipt of major training contract with Ford Motor Co. launches period of growth.
1993:: Telephone help-desk services are introduced and quickly become a major focus of the firm; the first European office opens in England.
1997:: Expansion slows; stock price drops after allegations of accounting fraud.
1998:: The company settles shareholder lawsuit for $11 million.
1999:: TechTeam restructures operations and returns to profitability.

In September of 2000 an $8.5 million lawsuit was filed against TechTeam by David Sachs, who alleged that the company had failed to split profits from a joint venture they had had together. Sachs, who had headed the recently dismantled TechTeam Capital leasing unit (formerly known as Capricorn Capital), received an out-of-court settlement. Some months later Sachs sought to take control of the company by requesting that shareholders vote on his proposal to be named CEO at the annual meeting in May. The board turned down his bid, but Sachs vowed to continue to fight for control of TechTeam. He owned 500,000 shares of company stock, slightly less than 5 percent of the total.

Although it was still dealing with some nettlesome side issues, National TechTeam appeared to be firmly on the path to recovering its stride, and it was looking to the future with renewed vigor. The company continued providing computer services to numerous major clients, with help-desk services remaining its leading revenue source. A new emphasis on web-based services also was beginning to take off.

Principal Subsidiaries

TechTeam Europe, Ltd.; TechTeam Europe, NV/SA; TechTeam Europe GmbH; National TechTeam of New Jersey, Inc.

Principal Competitors

CIBER, Inc.; Computer Sciences Corporation; Electronic Data Systems Corporation; International Business Machines Corporation; Renaissance Worldwide, Inc.; SITEL Corporation.