A Tarnished Gem's New Luster
Firm: Halifax Corp., Alexandria, VA
• Founded: 1967
• Specialty: Enterprise maintenance and seat management outsourcing; federal, state & local government
• No. of consultants: 75
• No. of employees: 325
As Enron Corp. executives dig through the debris of its accounting scandal trying to salvage profitable nuggets of business, Halifax Corp. CEO and president Charles McNew can't help feeling a little empathy, and a little hope, for the company.
In 1999, then sleepy government IT contractor Halifax Corp. and its former management saw its image tarnished, investors scorned, and stock price pummeled after the controller at one of its subsidiaries, Halifax Technology Services Co. in Richmond, VA, was convicted of embezzling $15 million from the firm between 1996 and 1999. (Mary Adams Collins was sentenced in September 1999 to 6-1/2 years in federal prison and ordered to pay the money back upon her release.) Halifax's president retired in early 1999 and McNew was called in to rescue the company from a near-death situation. Four other senior executives were also replaced.
"The goal was to survive," McNew recalls. "I really viewed our mission at the time as getting the company stable again and selling it, frankly. But by about mid-2000, we saw that we had the opportunity not only to recover, but also to grow and expand again."
McNew sold off some noncore assets to satisfy bank obligations and tried (with little success) to recover some of the embezzled funds. Most important, the firm shed its strategy of providing a technical line of solution offerings and switched to enterprise maintenance, seat management, and federal communications services.
Over the next three years, McNew replaced nearly 40 percent of Halifax's workforce to meet new skill requirements, and built relationships with larger contractors like IBM Global Services and Compaq Global Services, which provide Halifax with a small but profitable maintenance chunk of their own global networking contracts. The partnerships provide the bulk of Halifax's enterprise maintenance business, McNew says, but the firm has scored some of its own business maintenance contracts with the states of Pennsylvania and New Jersey, as well as with Dominion Power and Federated Department Stores.
Today, Halifax is on its way to recovery, although it's not out of the woods yet. Revenues for its third quarter ended Dec. 31 were $13.2 million, compared to $14.7 million for the same quarter last year, a 10 percent decrease. But operating income increased to $264,000 in Q3 compared to $254,000 last year. Net income was $109,000, or $0.05 per basic and diluted share, compared to $23,000, or $0.01 per basic share and diluted share for the same quarter last year.
Overall, Halifax's stock price has risen 125 percent in the last six months to $3.90 a share on Feb. 12, although it hasn't nearly recovered to its high of about $11 a share in January 1999.
McNew has started re-introducing Halifax to the government contractors it had backed away from following the scandal, and hopes to maintain 25 percent of its business in the federal government and 18 percent in state and local government over the next two to three years. It has already increased its staff by 15 percent (40 employees) over the last three months to handle two large maintenance contracts awarded from IBM Global Services.
"You don't have to give up," McNew says of other companies facing the same uphill climb. "You can come back and prosper. But you have to bring somebody in from the outside and sort it out."
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