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Reprinted from:
Pittsburgh Tribune-Review

MSA acquires steel industry's MetalSite
By Michael Yeomans, TRIBUNE-REVIEW

Management Science Associates Inc. has added a second failed Internet start-up company to its stable of businesses, acquiring the assets of MetalSite Inc., a once-promising electronic marketplace for steel, and its scrap steel sister, ScrapSite.

Management Science Associates, which employs about 800 at its headquarters in Pittsburgh's Point Breeze section, signed a letter of intent to buy MetalSite and Scrapsite for undisclosed terms.

MSA Chairman and Chief Executive Alfred Kuehn said Wednesday that MSA began hiring former MetalSite employees several weeks ago to work in other parts of MSA's business, including MSA Process Automation Solutions & Services Inc., which has served the steel industry since 1982 providing scheduling and process control systems for steel manufacturers.

"A lot of customers of MetalSite are customers of MSA Pass. That's one of the reasons this potential opportunity made sense for us," Kuehn said.

Kuehn founded MSA, which specializes in database number-crunching for the television and entertainment industry, in 1963.

At its height, MetalSite employed more than 100, but it had laid off 30 last year in an effort to preserve cash. It ceased processing transactions in early June.

Formed as an internal trading mechanism by Weirton Steel Corp. in 1995, MetalSite was launched as an independent firm in 1998 with additional investments by Bethlehem Steel Corp. and LTV Corp.

A year later Weirton sold a 35 percent stake in the venture to Philadelphia-based Internet Capital Group for $180 million. That company recently wrote off its entire investment in the metals trading venture.

The early success of Metalsite drew in other competing exchanges, including E-Steel, which obtained funding from Pittsburgh-based U.S. Steel, but remained independent from U.S. Steel or other steel manufacturers. But the company struggled along with the industry it served.

Kuehn stressed the new MetalSite will be independent of steel manufacturers.

"A viable exchange cannot be owned by an active participant," he said.

Kuehn said MSA has experience in providing systems to many players in the same industry. MSA's purchasing systems for advertising are used by nearly all cable TV operators in the nation, he said.

"They are bitter competitors, but they trust us to manage their information systems," he said.

Kuehn said the revamped MetalSite.net Web site should be active again sometime in September, operated by about 20 people. He said the cost structure of the former MetalSite was too high, including the space it had leased in Robinson Township.

"They had an entire floor. That's a hell of a lot of space and cost. It's not that we have that much excess space, but we don't think we will be squeezed," he said.

Patrick Gallagher, president of MSA Process Automation, said the new and improved MetalSite will add value from other areas of MSA's expertise, particularly in managing sales data.

"The information from sellers buying and selling will generate a lot of data, and we think analyzing that data will be a valuable service, particularly looking at data on imports and exports."

Gallagher said a number of former MetalSite customers have contacted him about reviving the service.

"We're encouraged by the interest in past customers wanting to get the site back up and running," he said.

Earlier this month, MSA announced its support for re-establishing the Nauticom Sports Network, an Internet radio network formerly operated by a subsidiary of North Pittsburgh Systems Inc. that broadcasted high school and local college football and basketball games.

It, too, is now operating from MSA's headquarters as the NSNSports Network.

"Like the sports network, (MetalSite's) costs were out of line with its revenues. We're enthusiastic about it being profitable," Kuehn.