Lockheed to sell two units in company restructuring

Lockheed Martin Corp. plans to sell most of its Enterprise Integration Group (EIG) and Pacific Architects and Engineers Inc., two units within the company’s Information Systems & Global Services business area.

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The divestiture is one of several actions the giant defense contractor announced today following a companywide review designed to reshape Lockheed’s portfolio and strengthen its performance over the long term, according to a company announcement.

EIG provides high-quality, independent systems engineering and integration products and services to help customers optimize their resources and manage risk.

PAE is a wholly owned subsidiary of Lockheed Martin with core competencies in military mission readiness, peacekeeping, global infrastructure support and disaster relief activities.

EIG and PAE combined produce approximately 3 percent of Lockheed revenue and less than 3 percent of its operating profit, the statement said.

“EIG and PAE are both solid businesses with good growth prospects, but their growth and ultimate long-term value are currently being constrained by their affiliation with Lockheed Martin,” Chairman and CEO Robert Stevens said in the announcement.

Stevens said the recently completed review factored in major changes in the global security environment, world economic conditions and the new priorities of the Obama administration.

“As a result, we are initiating several portfolio-shaping actions to strengthen our business over the long term,” he said.

Christopher Kubasik, Lockheed president and chief operating officer, said the plan to divest EIG was based on the federal government’s increased concerns about perceived organizational conflicts of interest.

“Through EIG, Lockheed Martin provides both systems and services to a broad range of government customers, and this has led to concerns about the potential for conflicting interests,” Kubasik said in the statement.

Divesting the company will free it from the OCI concerns and position it to grow, he added.

Regarding PAE, Kubasik said that when Lockheed Martin acquired the company it was envisioned to be an entry point to new customers that would need additional services especially information technology and systems integration.

“In the current market,” he said, “customers are seeking a different mix of services that do not fit with our strategy.”

PAE has about 6,400 employees and EIG has 2,200, with 400 of the EIG workforce expected to stay with Lockheed, according to Defense News.

In addition to the planned divestiture, Lockheed will realign two other IS&GS units -- its Readiness & Stability Operations and Savi Technology Inc. ­-- with the Simulation, Training and Support unit under Electronic Systems.

RSO is a provider of global services, offering rapid, cost-effective capabilities in logistics, mission operations support and readiness, engineering support services, and integration solutions.

Savi Technology provides wireless tracking solutions that enable decision-support for managing assets, inventory and shipments.

The new line of business will be named Global Training and Logistics, and will enable Lockheed Martin to offer a fully integrated portfolio of services, Kubasik said.

Lockheed also is renaming IS&GS to Information Systems & Global Solutions, replacing “Services” with “Solutions” to better reflect its focus and scope, the company said in the statement.

Lockheed Martin, of Bethesda, Md., ranks No. 1 on Washington Technology’s 2010 Top 100 list of the largest federal government prime contractors.