SAIC's new CEO puts focus on contract wins and acquisitions

Change was afoot at Science Applications International Corp. last year, with a new chief executive officer taking charge and a move of corporate headquarters across the country. But that didn’t trip up the company.

Amid the new, SAIC’s commitment to reaching its business goals remained, with revenue hitting a company-record of $10.9 billion in its fiscal 2010, which ended Jan. 31, up almost 8 percent from fiscal 2009. The company reached the No. 5 ranking on the 2010 Top 100, with $5.5 billion in prime contracts.

Walter Havenstein, who took over as CEO Sept. 21, 2009 — three days before the company moved from San Diego to McLean, Va. — credits the success to several accomplishments, including strategic acquisitions and work on new contracts.

In fiscal 2009, SAIC won 27 awards worth $100 million or more, compared to 17 in fiscal 2008.

“One that is most near and dear to my heart is the MRAP program,” Havenstein said, referring to a prime single-award blanket purchase agreement SAIC won in June 2009 from the Army TACOM Life Cycle Management Command to support mine-resistant, ambush-protected vehicles. The vehicles assist urban combat operations and can clear mines and roadside bombs. The first task order is worth $357 million if all options are exercised.

In November 2009, SAIC won five task orders worth $189 million under the Homeland Security Department's Enterprise Acquisition Gateway for Leading Edge solutions contract to support Immigration and Customs Enforcement’s Office of the Chief Information Officer. The company will assist modernization efforts and the maintenance of existing applications to enhance information sharing, integration and systems assurance strategies.

Acquisitions also played a role in SAIC’s achievements. In August 2009, the government contractor acquired R.W. Beck Group Inc., a consulting firm that specializes in engineering, energy and infrastructure. SAIC's cybersecurity sector got a boost in February when the company acquired CloudShield Technologies Inc. SAIC plans to combine its existing cybersecurity capabilities with CloudShield’s technology, which enables customers to inspect, analyze and control traffic on a network in real time. The combined offering will provide sophisticated IT network services and security solutions.

However, challenges abound, and a chief one is an ever-changing clientele.

“Here in Washington and throughout the government, they are having some unique challenges, whether they’re challenges with the budget or setting priorities within that budget,” Havenstein said. “I think that is the biggest challenge for us.”

Discretionary funds for contracting will likely take a big hit as the budget comes under pressure to stay relatively flat, Havenstein predicted, adding that President Barack Obama’s plan to reduce reliance on contractors will affect SAIC’s game plan but not its bottom line.

“Our response is to be agile when we see that work being shifted to make sure that we don’t put too much of our overall business in that kind of work,” Havenstein said. “We’re like everyone else in that regard.”

But SAIC is already feeling that damper on federal spending. Contracts came in less frequently and lower than expected during the first quarter of fiscal 2010, said Bill Loomis, managing director at Stifel, Nicolaus and Co. He said that to make up for that, SAIC needs to focus on high-growth areas, such as energy, health and national security.

Nevertheless, Havenstein is optimistic about SAIC’s performance in the coming year. “Even though I sound a little bearish about the market," he said, "I’m very bullish about SAIC in that I think that a lot of the solutions that can contribute to more efficiency and effectiveness of services by the U.S. government are going to be provided by a lot of the things that we give the government in terms of IT-based solutions and technical solutions."