No. 1: 12 times the fun for Lockheed

Defense contractor again lands at No. 1 spot thanks to its growing IT business

Lockheed Martin Corp.

Prime IT contracting revenue: $6.2 billion

Location: Bethesda, Md.

Leader: Robert Stevens, chairman, president and CEO

Employees: 135,000

URL: www.lockheedmartin.com

2005 revenue: $37.2 billion

2005 net earnings: $1.8 million

2004 revenue: $35.5 billion

2004 net earnings: $1.3 million

2005 "was really a great year for us," said Arthur Johnson, Lockheed Martin's senior vice president of corporate strategic development.

Rick Steele

Lockheed Martin Corp. wants to be known as more than just one of the world's largest defense contractors. In addition to making fighter jets and missiles, the company is expanding its IT business into new markets in anticipation of growing demand for sophisticated IT systems.

Such systems and IT programs account for about half of Lockheed Martin's sales and more than half of its earnings, said Arthur Johnson, senior vice president of corporate strategic development for the Bethesda, Md., company.

Lockheed Martin ranks No. 1 on the 2006 Top 100 list, the company's 12th straight year in the top spot.

Last year "was really a great year for us," Johnson said. "We had a number of big wins across the company, particularly in the IT arena." Those contracts not only will bring added revenue, but will establish the company as a key player in the growing government IT market, he said.

That's a smart strategy, said Ray Bjorklund, senior vice president of market research firm Federal Sources Inc., McLean, Va.

"People look at Lockheed Martin's legacy as a platform developer," he said.

However, "there are going to be fewer platforms purchased in the future," because of budget cuts and the increasing reliance on new technology to fight so-called asymmetric warfare, Bjorklund said.

"It isn't just a matter of having the most airplanes or the most ships; it's a matter of having the best way to manage information," he said. "Lockheed Martin has certainly recognized that and is continually moving into that area."

One key win came in February, when Lockheed Martin won a contract from the Federal Aviation Administration for its Automated Flight Service Station program.

The company will install new technology and upgrade facilities at the stations, providing for streamlined flight planning, shared weather- and airspace-system information, and integrated communications and search-and-rescue systems.

"The whole business-process management arena is one where we had been putting a lot of emphasis," Johnson said. The contract, he said, "gets us established in what is essentially a new market for us."

Another significant achievement last year, Johnson said, was a National Archives and Records Administration contract award to help the agency move to an electronic records and archiving program.

"The need to retain and to be able to reproduce electronic records is key," he said.

The National Archives' choice of Lockheed Martin was an important win that likely will lead to further business in the electronic information area.

Lockheed Martin also recently was selected to lead a team to design, develop and deploy an electronic surveillance system for the New York Metropolitan Transportation Authority. The project aims to coordinate and integrate command, communications and control capabilities across the authority's facilities.

Taken together, those contracts make for the "opportunity for market expansions in areas where we have not participated" in the past, Johnson said.

All in all, the company's IT businesses have been "growing pretty nicely," Bjorklund said. However, he added, competitors such as Northrop Grumman Corp. and Science Applications International Corp. also have been expanding their capabilities.

"The federal IT market is very robust," Johnson said.

President Bush has proposed an IT budget of $64 billion for 2007, which would be a 65 percent increase from $41 billion in 2000, he said. "That's just phenomenal growth, and we continue to see it in terms of opportunities," he said.

Among those opportunities for this year, according to Johnson, are:

»The Homeland Security Department's Secure Border Initiative-Net, a plan for a sophisticated, integrated border-security program

»The Defense Department's ongoing Encore program to support the military's IT needs

»FBI's automated fingerprint identification system. "We certainly intend to be competing for that," Johnson said.

Lockheed's advantages in the crowded market for government IT are its size, breadth of customers in the federal market and ability to draw from a 135,000-person workforce that includes 65,000 scientists and engineers, Johnson said.

"We have a tremendous customer reach and customer intimacy," he said. "We've been working with them 10, 15, 20, in some cases 30 or 40 years. We're a proven performer with them. We understand their requirements."

Lockheed Martin will continue to pursue strategic acquisitions, Johnson said. The "focus has been on niche acquisitions" in homeland security, IT and logistics, and these have paid off, he said.

For example, he said, a 2003 acquisition, Affiliated Computer Services Inc.'s federal government IT businesses, provided the technology that helped Lockheed to win the FAA's flight-service station contract. The company's capabilities in business process management "helped us formulate the strategy," he said.

"We look for accretive acquisitions that have a good value component to them," Johnson said. "We're not going to overpay."

The company is well-positioned to stay on top, Johnson said. In an era of cost-consciousness, the government increasingly is looking to competitive sourcing, "information sharing and leveraging assets across agencies," he said. "There are opportunities for companies like Lockheed Martin to help them do that."

Additional 2006 Top 100 Profiles
  • No. 1: 12 times the fun for Lockheed

  • No. 2: Northrop takes aim on health IT

  • No. 3: SAIC prepares for public debut

  • No. 4: Revving the acquisition engine

  • No. 5: CSC holds a lure for a buyer

  • No. 6: Raytheon works the system

  • No. 7: L-3 cuts bigger slice of govt pie

  • No. 8: For EDS, steady as she goes

  • No. 9: Booz Allen adapts to stay on top

  • No. 10: Dell solutions get superpowered

  • No. 11: BAE keeps acquisition fires burning

  • No. 12: Despite sale, Anteon's vision lives on

  • No. 13: Intelligence work fuels CACI's growth

  • No. 14: Verizon-MCI combination packs a punch

  • No. 15: Restructured IDS lets Boeing help clients

  • No. 16: ITT Industries aims for the sweet spot

  • No. 17: IBM Corp. steps up as a subcontractor

  • No. 18: Sprint Nextel goes for convergence

  • No. 19: For SRA, the profit is in its people

  • No. 20: It's always mission possible for Unisys

  • Overview: The Billion-Dollar Club

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