SAIC wins deliver on IPO's promise

As it celebrated its 40th anniversary in early 2009, Science Applications International Corp. was able to report that, for the first time, its annual revenues topped $10 billion for fiscal 2009 ending Jan. 31.

The performance marked a 13 percent increase compared to the previous year and enabled the major defense and homeland security contractor to reach No. 7 with $4.8 billion in prime government contracts.

“Our results show that we really hit our stride in 2008,” said Arnold Punaro, executive vice president and general manager of Washington operations at SAIC, noting that the company was awarded a record 27 contracts valued at more than $100 million last year.

They included a $410 million contract to provide information technology support to the Army Human Resources Command and a $454 million task order to support the Army National Guard Reserve Component Automation System and Distributive Training Technology Project.

Other significant wins in 2008 included multiple-award energy savings performance contracts for the Energy Department and the Army Corps of Engineers and a $254 million contract to support a key intelligence customer. The latter was especially rewarding, Punaro said, because SAIC was able to unseat a long-term incumbent.

SAIC broadened its capabilities in 2008 by acquiring two new companies: SM Consulting Inc., which provides services in language, intelligence, IT, business process outsourcing, logistics and training to federal, state and local agencies, and Icon Systems Inc., a provider of design, development and production of laser-based systems and products for military training and testing.

Punaro said the Icon acquisition is critical to helping SAIC enhance warfighter readiness and effectiveness for the U.S. military and its allies.

William Loomis, managing director of Stifel Nicolaus and a Washington Technology contributing columnist, said SAIC’s performance last year was the culmination of its strategy to switch to go from an employee-owned firm to a publicly traded company.

“Before, the company never really worked together to get the benefit of all the talent and experience and expertise that existed in its different business units,” Loomis said. “Now, they’ve really pulled it all together with strong contract wins, particularly last year, good backlog growth, profit margin improvement and strong organic revenue growth. And it’s not over. They’ve got programs in place that will enable them to become even more effective.”

As Punaro pointed out, SAIC has now successfully executed on all the commitments it made as part of its initial public offering, which took place in October 2006.

The company is now well-positioned to execute its long-term strategic plan, even as the federal market enters an era of increased contractor scrutiny, he added.

The strategic plan calls for collaborating as a united SAIC and making larger investments in emerging strategic opportunities such as energy efficiency, cybersecurity, border and port security, intelligence, surveillance and reconnaissance, and health IT.

“In the current environment, our platform independence and our focus on mission and technical innovation are key differentiators in the marketplace,” Punaro said, adding that he believes SAIC will be able to excel in a tough budgetary market because it keeps its margins low and doesn’t pursue work outside its core competencies.

Punaro also predicted that 2009 will be an even stronger year for SAIC.

The company is focused on creating significant new business in cybersecurity, health care and energy efficiency, and it came into the year with a healthy backlog of quality contracts in systems engineering, cybersecurity, integrated products and energy efficiency.
That backlog alone, he added, will enable SAIC to grow internally 6 percent to 9 percent in fiscal 2010.