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One GTSI Shakeup He Won't Oversee
Departing Chairman Helped Shape Firm

By Dana Hedgpeth
Washington Post Staff Writer
Monday, April 9, 2007

Dendy Young is retiring as chairman of Chantilly-based GTSI in May, this time leaving the turnaround to others.

Young, 59, was brought in as president and chief executive in 1995, when the company was struggling with dropping sales and dipping share prices, and his job was to turn the business around.

GTSI, originally Government Technology Services Inc., was selling computers to the government.

Young made changes in management, dealt with a federal investigation into contracting practices and made progress. He was chief executive until February 2006, when Jim Leto replaced him. Young remained chairman. Shortly after, GTSI's accounting firm said there was "substantial doubt" the company could continue as a going concern because of problems with its financial statements. The stock sank from $8.45 a share in December 2005 to $5.98 in April 2006.

As he leaves as chairman, the company has restated its earnings for 2004 and 2005 -- which barely affected its bottom line -- and narrowed its losses to $3 million last year from $13.7 million in 2005. And its stock price has risen; it closed Friday at $11.69 a share.

In the past few years, the company has been changing itself from a seller of equipment to a services provider.

"Dendy got a great deal of appropriate credit for building the company as a reseller business," said Stan Soloway, president of the Professional Services Council, an industry trade group for government contractors. "The industry has undergone change. It is much more of a service delivery, and he deserves credit for it growing into that. He recognized where it needed to go.

"They've gone through several years of transforming the company, and he deserves a lot of credit for what he did, bringing in the right people to guide it through the transition. He leaves a pretty solid legacy in the industry."

Born in what is now Zimbabwe and a graduate of Massachusetts Institute of Technology and Harvard Business School, Young said he got into the world of government contracting after meeting a "cute blonde in a bar" in Boston. Young went to her home in Washington to meet her parents and got introduced to a neighbor of the family who was in government contracting. He didn't stay with the blonde, but he did stick with government contracting, and in 1975 started working at Federal Data Corp. in Bethesda.

Six years later, he left and eventually went on to found two companies -- Falcon Systems, which sold large computer systems, and sister company Falcon Microsystems, which sold Apple computers to the government. In 1988, Oracle bought Falcon Systems and in 1994 Falcon Microsystems was bought by GTSI. Young became GTSI's chief executive the next year, just as the company was "going through some bad times," as he put it.

He was the fourth president in 12 months, arriving during a Department of Justice investigation. The company had been stuck with $22 million worth of computers on a deal gone wrong with the Air Force. Its lenders and auditors -- worried about the instability of the company's leadership -- threatened to put it into bankruptcy. It had extensive employee turnover, was losing money and some of its largest customers were threatening to stop doing business with the firm. A new internal computer system was a disaster.

"My first year at GTSI was spent fighting lots and lots of fires," Young said. "I was CEO during some very tough times.

"The CEO is always responsible for what happens," he said in an interview. "We rallied the team, and the company took care of our customers as our number one priority. And we took care of our employees as best we could under some strained circumstances."

Just as the problems were starting to clear up, Dell came into the market, selling its computers for less than Young could in deals with IBM. GTSI started to move more into selling not just hardware, but also services.

There were a few quiet years. The firm's revenue hit $1 billion in 2004. But another round of troubles ensued.

The company had problems both integrating a new computer system and complying with some Sarbanes-Oxley regulations. There was the grim "substantial doubt" comment from the auditors. In August, its chief financial officer left.

"It was a hard time for everybody," Young said. "We had people working night after night and weekend after weekend."

Young said he has seen government contracting go from being a more arms-length approach where agencies didn't talk to contractors before requesting bids, to now, with more talking up front about what kind of service or product the agency is seeking.

A year after Leto replaced him as chief executive, Young said, "it was time" to retire as chairman. Young, John M. Toups, lead independent director of the board, and another board member said there was no tension between Young and the board.

In an earnings conference call last week, Leto pointed out that the company had regained its footing, getting a clean audit -- the "going concern" mention was removed. Employee turnover dropped to 15 percent from 55 percent. And while its hardware sales decreased, it had a $35 million increase in service sales -- exactly the market it is trying to reach. New contracts were reported. "All the demons are gone," Leto said.

Young was vague about his plans but said he may consider starting another company in the "world of IT." His more immediate venture is to be part of the entourage joining Virginia Gov. Timothy M. Kaine (D) this month on a trade mission to India.

"I'll be listening and talking and trying to understand if there's any opportunities for Virginia to do business with India," Young said.

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