E-Systems Applies Intelligence to Transit Transportation

The Dallas-based reconnaissance firm spies a potent market in "smart" transportation technologies

efense intelligence giant E-Systems is positioning itself to deploy "smart" technologies to combat America's most frustrating enemy -- traffic. Combining its expertise in tracking moving targets with new transportation acquisitions, E-Systems hopes to build a business around intelligent transportation technologies. The Dallas-based company is counting on its transit ventures to develop into a viable business as its core federal market ebbs, but at least one analyst worries that the high-tech transportation industry will get too crowded.

E-Systems has created a new firm, Transportation Management Solutions Inc. (TMSI), to compete in the emerging intelligent transportation market that is expected to be worth billions.

The U.S. Department of Transportation estimates private companies, and federal, state and local governments will spend $209 billion over the next 20 years on developing and deploying advanced transportation technologies from electronic toll collection to car databases.

"The TMSI organization is another step in our basic strategy to diversify and expand into related business segments," said E-

Systems chairman and CEO Lowell Lawson in a press release. "This merger of capabilities and application of defense technological know-how is expected to improve fleet management systems in the transportation sector," he said.

E-Systems subsidiary HRB Systems in State College, Penn., will oversee the firm's new transportation unit, which will include two mobile data communications suppliers as well as the company's most recent acquisition on Jan. 3 of Westinghouse's Transportation Management Systems business.

The former 23-employee Westinghouse unit sells systems that use satellites to help public transit officials track the movement of their buses and other vehicles. The contracts Westinghouse had for systems in Baltimore, Minneapolis, Denver, Milwaukee and Los Angeles will be transferred to E-Systems.

Westinghouse employees will also be transferred -- but they won't have far to go. TMSI is across the street from the Linthicum, Md., building where the Westinghouse transportation group worked.

The company doesn't expect TMSI to generate profits right away, said E-Systems spokesman John Kumpf. But E-Systems' move into transportation products represents the company's long-term strategy to diversify and develop high-tech transportation into a strong business.

However, E-Systems isn't the first firm to turn defense technology into goods for the civilian transportation industry. TRW, Rockwell, Northrop Grumman and Hughes Aircraft Co. are all getting into the high-tech transportation market, and one analyst is concerned that there may not be room for everyone.

"The intelligent transportation systems business is no panacea, because in this industry you have the same people moving over to compete," said John Kutler, president of Quarterdeck Investment Partners in Los Angeles.

While E-Systems is trying to diversify into transportation and other new markets such as medical imaging and mass storage, the firm has no intention of giving up any of its core intelligence and reconnaissance business, Kumpf said. Ninety percent of E-Systems' revenues still come from defense, and the $2.1 billion firm just ended 1994 with a record backlog for federal business, he said.

Considered ripe for acquisition the last couple years as big defense companies have begun to merge with their competition, E-Systems' large backlog of business may make the firm even more attractive.

"If E-Systems were to put itself on the market, it would get a good price," Kutler said. However, there are not many companies left that can afford to buy or that would want to take over E-Systems, he said.

Westinghouse Returns to the Mainstream

The sale of Westinghouse's transit business to E-Systems did not surprise industry analysts who have watched revenues at the defense electronics firm slide the last few years. But the move suggests Westinghouse Electronics Systems is answering a call made last year by Westinghouse Electric CEO Michael Jordan for all divisions to return to traditional businesses.

The $2.6 billion Electronics Systems group sold the transportation unit because "this business no longer fits with Westinghouse's core communications strategy," according to an official statement from the Baltimore-based firm.

Westinghouse Electric will continue on one transportation avenue. It is still leading an industry team developing standards for how the components of an intelligent transportation system will communicate, said spokeswoman Maria Trintis. Westinghouse is one of four teams working on rival systems architecture under a Transportation Department contract.

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