When revenues plummeted and a new business strategy was needed, Philip Verges led his company down a new path.

There is rarely an easy solution to a business problem. Philip Verges, chairman and CEO of NewMarket Technology, found the solution to his company’s problems in one simple word: strategy. By recognizing an industry need for a business that introduced new technologies to market, Verges repositioned his technology company by developing innovative operational and capital strategies.

In 1997, NewMarket Technology began as a family-run business and as a systems integrator and reseller for dot-com companies. When the bottom fell out of the dot-com market, the company lost its entire product portfolio and went from $11 million in sales in 2001 to $2 million in 2002. Verges said he and his team decided to try and develop their own capital strategy for providing financing to early technologies.

“We sold the assets of our family-run business to a failing, over-the-counter, bulletin-board-listed company, cleaned that company up, and used the capital stock of the public company to raise cash," he said. “We then used that cash to acquire and invest in entrepreneurial companies with innovative technology products and services.”

Philip Verges

A new direction
The operational strategy behind NewMarket Technology is to sell, integrate, and maintain recognized market technologies while combining them with the sale of early, and often unheard of, technologies. Rather than approaching new clients, Verges said he and his team present new products and services from the company’s incubated portfolio to existing clients using traditional ones.

Almost half of NewMarket’s approximately $70 million annual revenue for 2006 came from selling traditional products and services. “We have numerous instances where we provide Microsoft desktop solutions to our clients as well as providing site training for them,” said Verges. “On the new technology side, one of our biggest success stories concerns our sale of an emerging networked computing system to one of our clients.”

The portfolio company that provided the system had only sold it in small installations. NewMarket went a step further by selling the pilot, running a successful test, and eventually making a $10 million installation sale. The sale, typical of 63% of the company’s revenue, was outside of the US.

“We’re discovering there is a better market for the sale of new technologies in developing economic regions,” he said. “In addition to our sales in the US, we primarily sell in South America, Singapore, and China today. However, we continue to look for other high growth, developing economic regions to expand to across the globe. We have Eastern Europe in our sights.”

NewMarket Technology is becoming a conglomerate of regional and technology industry-specific companies. As well as the systems integration services it provides, the company acts as a conglomerate of emerging technology products and services. Verges said he and his team acquire the technologies and keep them in subsidiary companies, hoping to eventually list them independently of NewMarket.

“We became a conglomerate of public companies,” said Verges. “By giving each one of these emerging technology or emerging market companies an independent public listing while maintaining it as a consolidated subsidiary, we develop capital stock that can be used to raise money for that company. But by having it consolidated, we still give it the support of a larger parent organization.”

In the fourth quarter of 2006, NewMarket listed its first consolidated subsidiary, its Chinese operations, under NewMarket China. Verges said his company is preparing to also list its Latin American and broadband wireless operations. He estimates that by the end of the first quarter of 2007, all three subsidiaries will be independent public listings.

The success of the company’s operational and capital market strategies prompted Verges to increase the size of the board of directors in 2006. Prior to that, Verges and another member of his team were the sole decision makers. Rather than facing the challenge of finding new companies alone, Verges now depends on his board to review and assess acquisition possibilities. Although the decision makers are different, Verges hopes the approach he used will remain.

“The primary process that was in place, and that I advocate as we go forward, is to be in the marketplace,” said Verges. “I spend a lot of time on the road going to industry conferences, but I tend to go to conferences that are local to specific regions.”

Because many emerging technologies do not have the budget to go to national conferences, regional technology conferences are the best place to discover new possibilities. “The key differentiator in our process to find the next up and coming entrepreneurial technology company is that we go local, not national, with our search,” said Verges. “We are willing to get on an airplane and go to where the companies are based rather than going to a broker in New York.”

Since dropping to $2 million in revenue in 2002, the company rebuilt and reported over $50 million in revenue in 2005 and expects to report approximately $70 million in revenue for 2006. Due to this rapid growth, Deloitte and Touche ranked NewMarket Technology as the fifth fastest growing technology company in North America in 2006. Verges, however, has not forgotten what propelled his company back to a comfortable position after the dot-com crash of 2002.

“It hasn’t been the financing or the business strategy; the strategies we use today have evolved and are the result of years of refinement,” he said. “Knowing there was an opportunity for a business that continuously introduced new technologies to the market, and my team’s commitment to that vision, was the key.”