TOP 100: Leidos takes deliberate approach facing market turbulence

Transitioning a company after a split is difficult enough, but when Leidos emerged at the end of September 2013 as its own company, the odds were really stacked against them: the government shut down began the very next day.

“We’re lucky to have emerged with only a handful of issues,” said Leidos chairman and CEO John Jumper.
Despite shedding part of its business and changing its name from Science Applications International Corp. to Leidos, the company is still ranked in the top 10 of the 2014 Top 100 at No. 8 with $3.3 billion in prime contracts during fiscal 2013.

“Transaction-wise, the split went as well as you can expect with a very complex situation like this,” Jumper said, “but we emerged as a company with a new name on Sept. 30, right in the face of sequestration and the government shutdown.”

The company was prepared for this turbulence as much as it could have been, Jumper said, but it was particularly difficult operating with a different billing, post-shutdown, as the government slowly got itself back up to speed. Leidos had to deal very deliberately with its customers, he said, to explain to them that they were the same company with all of the same history and most of the same competencies, just with a new name.

Sequestration has also been weighing down in the company, and not just in the way that it has affected all companies; it has actually affected Leidos’ commercial health business because of the impact to Medicare and Medicaid payments to hospitals where Leidos is engaged with electronic health care records implementation.

But the company has been dealing with these issues ever since last September, and Jumper said that Leidos is finding its balance, dealing with each one at a time.

Jumper talked a bit about some of the bigger contracts that Leidos has won. Top of the list was the $6 billion multiple award contract with the Homeland Security Department to provide continuous monitoring and mitigation services. The contract also called for a cloud-based cybersecurity offering.

On the health care side, Leidos nabbed a $178 million contract to provide and maintain a nurse advice hotline for the Defense Health Agency.

In addition to its many contract wins, Leidos has divested parts of its business in order to sharpen its focus. “We will continue to shape our portfolio to make sure we are focusing on our core competencies to make sure that we’re doing what we’re best at,” Jumper said.

Going forward into fiscal 2015, Leidos is wary of celebrating too early. While it is certainly good news that there is a budget agreement in place, “that has not in our experience filtered down to actual change in behavior on the part of the government yet. Sequestration is still the law of the land, and we have to remember that,” he said.

“While there might be bright spots that shine through, what we continue to see is delayed decisions, pushing task orders and decisions on major contracts off to the right, and I don’t see a change in that behavior any time soon,” Jumper said. “Other colleagues out there in the industry are more optimistic than that, but I think we are all affected in the same way, and I am reserving my optimism for when we start to see effects of budget availability turn into contract opportunities.”

Sequestration aside, the company is hopeful about certain markets. Leidos has core competencies in national security, health and engineering solutions, and Jumper sees opportunity in the land of cyber, particularly commercial cyber.

“We have strong qualifications in the cyber world, and to be able to translate and leverage that competence over to the commercial side is exactly the sort of thing that Leidos was invented to do—transition our technology across conventional lines to be able to do different things with the capabilities that we have,” Jumper said.

The company had a noncompete of sorts with SAIC, as well, but much of that work has been deconflicted, Jumper said, which opens up a slew of more IT-related opportunities for the company as well as things like command and control and electronic warfare.

Leidos is very focused on cross markets. Jumper spoke to the similarities between using deep analytics in the cyber world versus using deep analytics in the health care world. Applications of analytics in a cyber context are easy to figure out, but analytics can also be used in the health care industry to do predictive modeling just as is done in the intelligence community, Jumper said.

Leidos will continue to be focused on these sorts of issues as time moves on.

And as time moves on, the key to being successful lies with being more disciplined in your cost control. “In this segment of the market, with conflicts rising around the world, the discipline of cost control is more important than it used to be,” Jumper said. The company has a plan of continuous improvement that it is sticking to.

Jumper is the verge of his retirement as CEO – a successor has not been named yet – but he will remain as chairman.