No. 16: ITT Industries aims for the sweet spot

It's a tried-and-true government contractor strategy: Take a selected handful of former clients and offer them jobs with your company. They know the markets, the players and, most importantly, exactly what you need to close big deals.And one other thing: When most of your federal dollars are coming from the Defense Department, make those new hires military retirees.This approach seems to be working for ITT Industries Inc. It has, for the second consecutive year, snagged the No. 16 spot on the Top 100 list, this year with $865.4 million in prime IT contracting revenue.Although reduced in overall personnel, by a little more than 3,000 full-time workers, compared to last year, the White Plains, N.Y., company saw a double-digit rise in revenue in 2005, up 17 percent to $7.4 billion from $6.3 billion in 2004."All of my folks in business development are former military," said Jim Crumley, vice president of business development for ITT's Defense Electronics and Services unit. "They've been the customer. That's why they understand the problems and the solutions."On the defense side, one solution offering, literally, a bright spot for ITT is night-vision goggles. The devices are in high demand by the Army and Marine Corps for forces deployed in Iraq and Afghanistan. Following an Army contract award in September 2005, the company has ramped up production at its facility in Roanoke, Va., adding manufacturing personnel and expanding shifts to produce thousands more pairs of goggles.The indefinite-delivery, indefinite-quantity deal could be worth as much as $1.4 billion over its five years. The initial outlay includes more than $160 million for current and next-generation versions of goggles, as well as $40 million for related production facilities and equipment.Defense electronics and services account for roughly 40 percent of ITT's total revenue: about $3.5 billion of the $8.5 billion ITT is projecting it will bring in during 2006.The increasing sophistication and widespread incorporation of advanced electronics into military systems will be a strong growth opportunity for the company, Crumley said."Electronics are getting smarter. The percent of electronics embedded in systems is increasing," he said. "Our issue is what percent we are of the defense budget, and can we keep growing our share. The areas we're in are what we think of as the sweet spot of the budget."ITT in March won an $82 million contract for an electronic warfare system installed on the Navy's F-18E/F fighter attack aircraft and designed to help pilots evade enemy radar.The award is in addition to a related countermeasures contract for $146.1 million ITT won in 2004.Including options, the two deals could be worth as much as $454.7 million. Subsequent production contracts, spares and associated work could significantly add to the overall value, Crumley said.On the civilian side, ITT personnel in late March supported one of NASA's newest exploration missions, the Mars Reconnaissance Orbiter. It carries instruments to identify water-related deposits, radar to probe for buried ice and water, a weather camera to monitor the planet and an infrared sounder to monitor atmospheric temperatures and water vapor.ITT also is mulling as many as 20 potential acquisitions as a way to fuel growth, Crumley said, but only a handful are likely to pass muster.Before a deal closes, Crumley said, "we want to know it will succeed."