ManTech lays off 100 at investigations unit

ManTech International Corp. yesterday announced it has laid off 100 employees at its MSM Security Services Inc. unit, saying the company expects to post a second quarter loss.

The unit performs background investigations for the Defense Department's Defense Security Service. ManTech acquired MSM in March 2003 for $4.9 million, and these are the first layoffs involving the unit, said Mark Root, executive director of corporate communications.

The layoffs will not prevent the subsidiary from fulfilling its contract obligations, Root said.

Company officials blamed the expected second quarter losses on changes in government policies affecting the MSM subsidiary, but did not elaborate on these changes. They did not say how much of a loss they expect.

ManTech officials also said they could not commit to meeting previous revenue and earnings guidance. In May, the company lowered its revenue guidance for the second quarter to $197 million to $201 million from $204 million to $208 million. Earnings per share were reduced to 13 cents to 15 cents from 32 cents to 34 cents.

The company kept its yearly revenue guidance the same at $840 million to $855 million, but reduced its earnings per share to $1.17 to $1.21 from $1.38 to $1.42.

The company will issue its second quarter results by Aug. 9.

MSM performs work for the Defense Department's Defense Security Service. The department's personnel security investigative functions and more than 1,800 investigative employees are to transfer to the Office of Personnel Management. But the transfer has been delayed by a backlog in the Defense Department's issuance of security clearances.

Sandra Notardonato, government IT services analyst at Adams Harkness Inc. in Boston, said that MSM's layoffs resulted from the risky nature of its fixed-priced contract for investigation services for the Defense Department. She said there is a possibility for more job cuts if MSM's business with DSS and OPM goes away.

Root said the company would not speculate on further job reductions.

Notardonato said it is unknown how the shift in DSS' personnel security investigative functions to OPM will affect request for proposals for upcoming contracts.

"Once OPM and DSS make up their minds, we'll have a much better understanding of what the company can expect from its MSM subsidiary," she said.

She said it is unlikely that ManTech will try to sell or divest MSM in the near future. Root declined to comment on a possible sale.

ManTech provides systems integration services for defense and civilian agencies. The company ranks at No. 22 on Washington Technology's 2004 Top 100 list, which measures prime contracting revenue.

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