Top 100: Leidos navigates twists and turns to reassure customers, win new business

Leidos faced the daunting challenge of simultaneously being a brand-new company and 45-year-old company. New CEO Roger Krone explains how they navigated the twists and turns of their first year to reassure customers and win new business.

Being at once a brand-new company and a decades-old company inherently comes with challenges. In its first full year after changing its name and splitting Science Applications International Corp. into two companies in 2013, Leidos found itself trying to reassure its workforce and customer base while also drumming up new business.

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“We’re in the process of establishing a brand,” Leidos Chairman and CEO Roger Krone said. “On Day 1, we were a 45-year-old company that no one had ever heard of. We had customers who we had literally decades of relationships with who weren’t quite sure who we were and whether we still thought they were important because we had changed our name.”

The road has had its twists, but Leidos is making its way uphill. The Reston, Va.-based firm earned $5.8 billion in revenue last year, with 78 percent of business coming from the government. Of that, 68 percent came from the Defense Department and 19 percent of that from the Army. Although revenues were down slightly from $6.5 billion in 2013, Leidos has earned the No. 16 spot on this year’s Top 100 list.

The company’s biggest contract win since its rebranding came in February from the United Kingdom Ministry of Defense. Under the 13-year contract, estimated to be worth about $12 billion, Leidos will support the Logistic Commodities and Services Transformation program.

But as with any company getting on its feet, Leidos spent a good part of 2014 on restructuring. Leadership changes included Krone’s own hiring last July, but the firm also named a new vice president of business development in September and a new executive vice president for business development and strategy in November.

“When you split the company, half of the company goes to the new company,” Krone said. “So where you might have had a complete portfolio of engineering and research and human resources and business development, by definition half the people leave. You have to backfill those positions with new people.”

The result of the new team is a clearer overall strategy, he said.

“It was reaffirming our core strategy and capabilities and getting back to basics, so we’ve defined five core capabilities: cyber, C4ISR, data analytics, systems engineering and agile software development,” Krone said. “I think it was uniting the team around those core competencies as they support what we do in our three served markets of essential national security, health care and engineering, and that really guided us toward customer opportunities and [requests for proposals] and new business and allowed us to get the focus that we needed to be successful.”

Despite the optimism, challenges remain. Defense and health budgets have shrunk, for instance, and new leaders at the Defense, Homeland Security and Veterans Affairs departments have introduced some uncertainty.

“I would say the bigger challenge, as opposed to a down market – because there are always up and down markets – is the predictability of what was actually going to happen in the market,” Krone said. “I think the challenge for all of us in this space is to understand where the customers are going, where they will be a year from now or two years from now, what we can expect from an authorization and an appropriations budget in all of the government businesses that we serve.”

He sees opportunities for growth in the areas of big data, intelligence and surveillance, and cybersecurity. Additionally, Krone said, the U.K. contract win will open Leidos to more international work.

Fiscal 2015 is already off to a good start. In the first quarter, Leidos booked $891 million in new business. Those wins included a prime contract from Army Intelligence and Security Command for intelligence support, $364 million in intelligence community contracts, and a $50 million prime contract from Naval Facilities Engineering Command Atlantic.

“We’re very pleased with where we are in 2015,” Krone said. “Right now, from where I see, it’s a clear blue sky.”

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