IT fuels General Dynamics first quarter revenue

Move over combat systems and aerospace, information technology is part of General Dynamics' core expertise as well.

For the first time, General Dynamics Corp.'s IT group has generated more revenue than the aerospace, combat systems or other General Dynamics' groups more traditionally associated with the company's defense work.

During an analyst conference call held April 17 to discuss first quarter 2002 results for the Falls Church, Va.-based company, General Dynamics chairman and chief executive officer Nicholas Chabraja said: "Information Systems and Technology was the sales leader for the first time among our four groups."

He also said the group "cracked the 10 percent barrier for the first time" for profit margins and that its total revenue was up by 42 percent.

"We certainly have to be very pleased with the maturation of that business," he said.

The information systems group brought $871 million to General Dynamics' first quarter 2002, which ended March 31. In that same time, marine systems brought in $864 million; aerospace, $763 million; and combat systems, $573 million.

For analysts, the numbers are indicative of the company's move towards more IT-intensive work.

"This has been a conscious move on General Dynamics' part," said Ray Bjorklund, vice president for market research and consulting company Federal Sources Inc. of McLean, Va. "The overall trend in the industry for many defense integrators is to get generally away from building hard machines and getting more into exploiting the capabilities of information technology. General Dynamics has been on that trend for some time."

According to Chabraja, much of the group's dramatic revenue increase came from the Decision Systems group that the company purchased from Motorola Inc., Schaumburg, Ill.. in September 2001. That unit specializes in secure communication, information assurance, situational awareness and integrated communication systems.

However, Chabraja also praised the information systems unit as a whole, saying that "18 percent of the growth [in the IT group] was organic sales." In 2001, the company did an internal realignment of the group.

Chabraja said the biggest contributor the unit's internal sales growth was a $2.4 billion contract with the U.K. Ministry of Defence to provide an Internet protocol-based secure digital voice and data communication system for the country's armed forces.

In terms of operating earnings, however, General Dynamics' aerospace unit still brought home the most bacon, with $144 million for the quarter, as compared to $87 million for the IT group. However, earnings growth was flat for aerospace when compared with first quarter 2001, whereas IT jumped from $60 million.

Overall for the quarter, General Dynamics enjoyed 17 percent revenue growth when compared to the first quarter 2001. It reported net earnings of $229 million on sales of $3.1 billion.