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Mastech name change pays off

Wednesday, March 08, 2000

By Ken Zapinski, Associate Editor/Business

The market price for a good e-business idea: a cool $1 billion.

Mastech Corp. saw its market value jump that much because the Oakdale-based technology company unveiled a new name -- iGate Capital Corp. -- and a new business plan.

As Mastech, the company provided computer software, consulting and staffing help to businesses around the world.

As iGate, it will transform the old Mastech business lines and some new ideas into a portfolio of separate companies. Each will focus on helping corporations with very specific aspects of their electronic commerce strategies.

IRG Inc., for instance, will help companies sift through their huge databases for valuable nuggets of useful information. Symphoni, based in New York, will provide Web marketing expertise. iGate begins life with nine such companies, but Chief Executive Officer Sunil Wadhwani said he wants to double that number by the end of the year through acquisitions and internal growth.

"This is only the beginning," said Wadhwani, who helped found Mastech in his Mt. Lebanon home in 1986. "We are a very different company from today on."

Indeed. The business at Mastech's heart -- providing temporary computer workers to companies to deal with specific projects -- was not even mentioned in the company's official iGate announcement. The staffing business accounted for about 35 percent of Mastech's $470 million in revenue last year, but it may not have a place in iGate. Executives are assessing the future of the Mastech Applications Services division, which could include a sale to an outside company.

iGate employs about 5,500 people worldwide, with close to 600 in the Pittsburgh region, including 300 at its Oakdale headquarters. The company, which changed its stock symbol to IGTE, closed at 643/16 yesterday, up 211/4.

"The key now is execution," Wadhwani said.

Internet technology is developing so rapidly that corporations need lots of help to use it to their best advantage, Wadhwani said.

The smaller focused companies in the iGate portfolio will be able to act and react more quickly and flexibly than Mastech ever could, he said.

iGate intends to take its companies public as they grow, with the first two -- Emplifi Consulting and Mascot Systems -- expected to have their initial public offerings of stock within the next few months.

Wadhwani said iGate shareholders will have a chance to purchase shares at IPO prices.

The new structure will also give Wadhwani the chance to retain and attract executives by offering bundles of pre-IPO stock options that could be worth tens of millions of dollars if the companies are successful. Mastech, which went public in 1996, could never match that.

In addition, iGate intends to operate two investment funds. The first is a $75 million fund that includes a $50 million Mastech-financed venture fund announced last year, with an additional $25 million from iGate.

The second, to be kicked off in the third quarter, will start with $100 million from iGate with an additional $200 million to $300 million from strategic partners, according to iGate spokesman Will Graves.

Through the first nine months of last year, Mastech reported net income of $30.2 million, or 60 cents per share, on revenue of $362 million.

The company has not yet reported its year-end figures.

The nine companies in the iGate portfolio and the company's definition of their businesses are:

Emplifi Consulting (enterprise Web integration), Mascot Systems (Web-focused offshore services), Enterprise Network Solutions (network consulting), eJiva (customer-care solutions/Internet trading solutions), Symphoni (Web marketing solutions), IRG (business intelligence/information data management), iGate Europe (Web integration services for the European market), iProcess (a joint venture with General Electric Co. for outsourcing Web-based business processes to offshore locations), and Extranet (e-vendor management).

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