Big shoes to fill
CACI's Cofoni faces tough market as he takes CEO reins from London
- By Nick Wakeman
- Jul 06, 2007
Outgoing CACI CEO Jack London, left, and his replacement, Paul Cofoni
Paul Cofoni faces more of a challenge than just following in the footsteps of a legend of the government contracting world.
As the new chief executive officer of CACI International Inc., Cofoni has the task of leading a $2 billion a year company to its next level of growth while the market it is in scrapes the bottom of its own growth cycle.
"The government right now is on sort of a semistarvation diet," Cofoni said. "If you aren't in the war fight, you are tightening your belt a notch every year."
But Cofoni, who joined CACI as president of U.S. operations in August 2005, sees the company as well-positioned for growth in the defense, homeland security and intelligence markets. "That is where the great need will be, independent of how long we are in Iraq," he said. "And Jack has built a world-class team here."
The Jack he is referring to, of course, is J.P "Jack" London, who has served as CEO of CACI since 1984 and chairman since 1990. Although he's handing the keys to the CEO's office to Cofoni, London will remain chairman of CACI.
"We've been working as a team, and Paul has done a fantastic job of moving in here and working as a partner," London said. "I think it is an ideal time to move into the next phase of CACI's story."No surprise
Cofoni's elevation sparked little surprise among analysts tracking the company.
"Jack has given Paul more and more responsibilities," said Bill Loomis, an analyst at the investment bank Stifel, Nicolaus and Co. and a Washington Technology columnist. "He has a lot of big-company experience."
Cofoni, who spent 17 years at General Dynamics Corp. and 14 years at Computer Sciences Corp., was recruited in large part because of that large-company experience, London said.
That kind of experience is critical as the company shoots for its next phase of growth ? becoming a tier-one player in the government information technology space. The company is projecting 2008 revenue of more than $2 billion. CACI's fiscal 2007 ended June 30.
Part of Cofoni's role since coming on nearly two years ago has been to start building the infrastructure to take on larger projects.
"Our business has already shifted away from small- and-medium-sized opportunities to where the opportunities larger than $100 million are what we deal with every day," Cofoni said. "Our goal is to get to the tier-one level and compete for the most complex, large problems the government has and help solve those."
The shift has paid off with major wins such as the Defense Department's Encore II contract and the Army's Information Technology Enterprise Solutions 2-Services, Strategic Services Sourcing, and the Field and Installation Readiness Support Team contracts.
The company has built centers of excellence where people with similar skill sets are pulled together to take on larger projects. "When you are working on large systems, you have to have access to the full resources of the company," Cofoni said. "You have to be able to reach back into the entire organization and draw on the talent and skills from anywhere in the company."
Another change has been the introduction of an account planning and management strategy so the customer sees one, unified CACI, not a lot of parts, he said. "We have to behave as one CACI and treat the customer as a long-term relationship, not just as the next opportunity."
The shifts are taking place, but there is still work to be done, he said.
"The biggest challenge now for CACI isn't internal, it is external" because of tight government budgets, said Mark Jordan, an analyst at A.G. Edwards and Sons Inc.
But the company needs to shift to more higher margin work, and it can do this by passing less work to subcontractors, he said.
CACI plans to continue its aggressive mergers and acquisition activities, Cofoni and London said.
M&A activity has been an important driver for the company's revenue growth in the last year. In CACI's May 5 quarterly filing with the Securities and Exchange Commission, the company said that although DOD revenue increased by $82.2 million for the nine months ended March 31, all of the increase was attributable to acquisitions. Revenue from existing operations fell $6.6 million, according to the SEC filing.
With civilian agencies, CACI's revenue grew by $47.5 million, with $43.9 million from acquisitions and $3.6 million from existing operations.
"We'll lean heavy on M&A for growth until the war subsides and the funds return to domestic needs," Cofoni said.
But acquisitions will need to fuel future growth. "We don't want just companies with high growth in the past but companies with a credible ability to grow at a good clip going forward," he said.Active chairman
As part of the transition to Cofoni's leadership, CACI also promoted William Fairl to president of U.S. operations and Randall Fuerst to chief operating officer of that division.
London said his role as chairman will be an active one. He'll work on the company's mergers and acquisitions, help plot business strategies, maintain relationships with key customers, and help and advise Cofoni.
"There is a lot more accountability and reporting requirements at the board level? appropriately so since the Enron situation," he said. "This will be a full-time job for a while."
London is used to a full schedule. When he took over as CEO in 1984, the company had $109 million in annual revenue. In 1992, two years after being named chairman, he launched an acquisition strategy that has led to 35 successful deals in 15 years.
"His legacy will be a very good one," said Tom Meagher, an analyst at the investment bank Friedman, Billings, Ramsey Group Inc. "It has been a tremendous run for them."Editor Nick Wakeman can be reached at firstname.lastname@example.org.