Kenneth Kirsch explains his vision for Network Six, Inc. in terms of what people think of the company now and how the president and chief executive officer wants them to think about it in the future.
“I think today people hear Network Six and they think software development for human service agencies,” Kirsch said on a recent afternoon at his Warwick office.
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It makes sense. The company for the decade has focused on almost nothing else. But now that’s changing. The company that gained a reputation and several lucrative contracts based on work it did for the state of Rhode Island has started developing custom software for private companies and consulting with universities, too.
The company is winding down a year-long project for GTECH, the world’s leading supplier of on-line lottery systems, just as it’s helping Johnson & Wales University come up with a strategic technology plan, Kirsch said.
GTECH is the kind of work Kirsch had in mind more than a year ago when he created a network services division to supply a steady flow of private sector projects. Johnson & Wales is about strategy.
“We’re not interested in being a strategic partner with the lottery industry,” said Kirsch, who worked for GTECH from 1983 to 1993. (He joined Network Six as vice president of sales and marketing in 1995.) At the same time, there’s a need for companies that can design, implement and support internal and external computer networks well, he said, adding “we expect that (division) to grow substantially.”
“We know that it’s important to have focus. We can’t be all things to all people. However, there are other areas we think we can service very well,” Kirsch said.
The company’s work with Johnson & Wales on the other hand, is an attempt to create a second niche in higher education.
“It’s a market that’s not been well-served,” Kirsch said. “While we haven’t done any of that historically, we’re looking at what our customers are saying and where the market is going: from a lot of customized software to packaged software.”
For now, Network Six is consulting with Johnson & Wales on problems like wiring dorms for the Internet and the Year 2000, Kirsch said. But the future lies in “learning some of these packages, installing them, training the users and enhancing the software” to make it a sort of customized, off-the-shelf product. Network Six’s plan is to become experts in higher education systems the way it became experts in human services systems from welfare to child care, he said.
“We want to be a great company, not a mediocre company,” Kirsch said. “One way to do that is to differentiate ourselves from other companies in the business. By having a niche, we’re able to look at a project and say ‘we’ve run the obstacle course 10 times, 20 times.'”
The approach seems to be working so far. The company reported revenues rose 13 percent, to almost $5.5 million, for the six months ending June 30. Revenues were about $4.8 million for the same period in 1997. The increase amounts to 38 cents per diluted share, up from 2 cents per diluted share for the same period in 1997.
The publicly traded company (NASDAQ: NWSS) returned to profitability after a dismal 1996 in which the company had revenues of $7.3 million and suffered a $1.76 million loss, largely due to the loss of a $25 million contract with the Hawaiian Child Support Enforcement Agency. The company reported revenues rose 56 percent, to $11.5 million, for the year ending Dec. 31, 1997. Net income was $406,950.
Kirsch said he expects this year’s third quarter results to be released this week and “to be very good.” As for year-end results, Kirsch said he would “feel comfortable doubling our numbers for the first six months.”
“I think there’s a good chance we’ll do even better,” he said.
Meanwhile, Network Six is stepping up its marketing efforts, using some of a five-year, $500,000 loan from the Business Development Corporation of Rhode Island and the Small Business Loan Fund Corporation, a subsidiary of the Rhode Island Economic Development Corporation. Each organization contributed half.
The timing seems peculiar given that the company has been operating on current cash flows since last January and has not needed to draw upon a short-term, $1.5-million secured line of credit. But Kirsch said the company is storing up for the future.
“We’re going to grow the company and we’re going to need it. When you need money, that’s when you can’t get it. When you don’t need it, it’s a lot easier to get it,” he said.
Assessing Network Six’s overall performance is difficult, as the few analysts who once followed it have stopped doing so. Kirsch said he thinks investment bankers are waiting to see what happens with a $70 million lawsuit the state of Hawaii filed against the company two years ago alleging breach of contract. Network Six filed a counter suit based on the belief that “they wanted us to deliver a system very much different from what we believe they ordered,” Kirsch said. The cases are pending without trial dates. Kirsch said he’s “cautiously optimistic we’ll win” should the suit go forward. However, he doubts that will happen and thinks the parties will settle instead.
“I’m looking forward to getting it behind us,” Kirsch said. “Perhaps then the company will have a price-earnings ratio not of 5, but much closer to what other companies in the industry have.”
