Volante Group (ASX:VGL) CEO, Ian Penman, under fire from critics...

Volante Group (ASX:VGL) CEO, Ian Penman, under fire from critics for months, has answered his detractors in the best possible way by presiding over a massive services tender win which is estimated to be worth up to $100 million over five years and will provide a substantial boost to the company's bottom line.

Volante has been selected as a preferred tenderer for the South Australian Government’s Distributed Computing Support Services (DCSS) procurement. This includes Server Management and Support Services (SMSS), Client Management and Support Services (CMSS), Service Integration Services (SIS), and Solution Design and Advisory Services (SDAS).

The contract is part of a series of competitive tenders following the breakup of the SA's whole-of-government outsourcing deal with EDS which finishes on 1 January 2007. Under the agreement Volante is to provide SMSS for approximately half of the South Australian Government’s server fleet.

According to industry sources, the services contract will be worth $10-20 million a year to Volante over five years. Unlike the case with low margin hardware products, services is a highly profitable business with margins in the range of 20-30%. Thus the deal is expected to add $2-5 million to Volante's bottom line each year. The DCSS deal is comparable to Volante's Federal Government Group 8 contract, worth $160 million over five years and which runs until 2009.

Recognising the significance of the Volante win, the market pushed VGL shares sharply higher in a day of high volume trading. VGL shares, which had been as low as 65c late last year, closed up 6c to finish on $1.14 with nearly $2 million of shares traded. As a result, the hostile take-over bid launched on 23 December 2005 by telecoms equipment supplier Commander appears to be in disarray. Commander, which had offered $1.01 a share, may now have to pay as much $1.30 if it wants to gain control of Volante, according to industry sources.

The Volante win is a personal triumph for the company's CEO Ian Penman who in recent weeks has been forced to suffer in silence while critics lambasted his leadership and strategy of promoting the services part of the company's business ahead of the products division. Mr Penman is now able to laugh off the recent calls for his resignation. It also puts a new perspective on the recent behaviour of the Volante board, which was steadfast in its rejection of the Commander acquisition offer to the point of being contemptuous, despite reports that Volante was a company in trouble with few significant new business deals in the pipeline.

On a personal financial level, a huge winner has been Volante chairman Robin Crawford, who was able to take advantage of the company's depressed prices on the market during November and December and snap up about 1 million shares for between 83c and 99c a share. Mr Penman also took advantage of the bargain basement prices in December to increase his far more modest Volante holdings by 60,000 shares to bring his total holdings to 100,000 shares during December. Mr Penman also holds 3 million options for Volante stock, which at exercise prices of $1.33 and $1.48 are still well under water.

Volante currently has a small South Australian presence of 80 employees and sources say that the DCSS contract will require about 50 additional staff in the Adelaide office.

http://www.itwire.com.au/content/view/3055/48/