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TECHNOLOGY–Titan Soars Toward The Billion Dollar Club

San Diego’s Titan Corp. may join the billion-dollar club sooner than expected.

Last year, Titan’s 60-year-old founder, president and CEO Gene Ray, predicted his company would hit the $1 billion revenue mark in the next five years. Now, he says, the company could reach that goal in the next one to two years.

Analysts forecast Titan will generate at least $800 million in revenues this year alone.

That’s up nearly $400 million from 1999.

The company’s global work force has nearly doubled since last year, from 2,500 employees to more than 5,400.

Titan’s growth and success has not happened overnight.

The company first opened in 1981 as a defense contractor. By the end of the 1980s, the defense budget had dropped about 40 percent. Titan had to either sink or swim. Ray and his staff chose the latter.

“Instead of describing ourselves as a defense company, we’re now describing ourselves as a technology company,” Ray said.

Titan has built its technology strength by not only building from within, but also by acquiring other companies.

Titan has acquired more than a dozen companies in the last two years, Pulse Engineering being one of the most recent. Maryland-based Pulse Engineering provides highly specialized information security and signals intelligence systems and service to the intelligence community.

Business Units

Another part of Titan’s successful business strategy has been spinning out a minority interest in some of its business units in order to raise capital. Titan’s business units include government information technology, wireless telecommunications, food pasteurization and business-to-business E-commerce.

Titan plans to spin out 20 percent of its business-to-business Cayenta.com in an initial public offering within the next few weeks. Ray said Titan plans to eventually spin off the rest of the subsidiary to Titan shareholders.

“Our core competency is creating new technologies, evaluating the market needs and growing shareholder value,” Ray said.

That value will definitely grow for Cayenta, said Mike Crawford, equity analyst for B. Riley & Co., a research firm and brokerage dealer in Los Angeles.

“Cayenta is going to be a home run,” Crawford said. “It’s a very hot space right now on Wall Street. Also, (Cayenta) has an experienced team that has been together for a long time.”

Crawford believes Cayenta could be worth the entire market cap Titan is worth today, which is $2.1 billion.

Success Not New

Such successes aren’t new to Titan. Last year, one of Titan’s spin-offs, IPivot, another E-commerce firm, was sold to Intel Corp. for $500 million. IPivot was positioning itself for an IPO before company officials decided to sell.

Titan, which had an 8 percent ownership in IPivot, netted about $41 million from the IPivot sale.

IPivot was not Titan’s only financial success last year. The company was the No.1 market gainer on the New York Stock Exchange in 1999, with a 760 percent jump.

Titan’s stock closed at $46 mid-week last week. The 52-week range was $4 to $49. Earlier this month, FS Van Kasper upgraded Titan stock from a “buy” to a “strong buy.”

“The reason Titan hit the No. 1 stock on the New York Stock Exchange is because its businesses are hitting on all cylinders,” Crawford said. “They’re in hot markets with explosive growths.”

One of those markets is wireless communications.

“For the past 20 years they’ve been handling wireless communications for the Defense Department,” Crawford said. “Now Titan is building a global wireless communications service business. They’re enabling communications in a lot of regions around the globe, such as South Africa and the Middle East. That’s the path wireless has taken.”

Long-Distance Services

Under a partnership with Sakon, a New Jersey-based international telephone service provider and communications company, Titan has made an agreement with companies in 16 countries to provide long-distance service using Titan’s satellite communications technology.

Ten of those countries are already up and running. Titan and Sakon plan to provide service to 22 more countries by the end of the year.

Titan is also developing a small, low-cost terminal for broadband Internet access.

“I think by the end of the year they will be an Internet service provider for developing nations,” Crawford said about Titan.

Titan’s wireless business tripled last year, generating $27 million, Ray said. Analysts predict Titan’s wireless business will do more than $80 million in 2000.

Ray said Titan also plans to double or even triple its food pasteurization revenues.

Titan’s much-touted food pasteurization technology, SureBeam, uses electricity to destroy food-borne bacteria, such as E. coli, listeria and salmonella, without affecting the taste or nutritional value of food.

Titan, which built the nation’s first system last year to electronically pasteurize ground beef at the Cloverleaf Cold Storage facility in Sioux City, Iowa, has already aligned itself with companies such as Kraft Foods, Inc. and Mitsubishi.

Last December, Titan’s shares jumped 12 percent after the U.S Department of Agriculture approved pasteurization of meat.

Titan still has a very active defense business. Earlier this month, the firm netted a $29 million contract from the U.S. Navy’s Space and Naval Warfare Systems Center for research, design and development support for electromagnetic systems for the Navy and other government agencies.

What’s next on Titan’s agenda?

“We expect to see before the end of this year at least one or two businesses evolve,” Ray said, hinting toward the information technology area.

Crawford predicts Titan will also introduce a microelectronics business this year.

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