No. 7: General Dynamics in full sprint

Fueled by a steady stream of major acquisitions, GD expects to win its share of contract trophies

General Dynamics Corp.

Top 100 revenue: $4 billion

81,100 Employees

2006 revenue: $24.1 billion

2006 net income $1.7 billion

2005 revenue: $21 billion

2005 net income: $1.5 billion

Jerry DeMuro

Rick Steele

General Dynamics Corp. is seeing green this spring as a series of opportunities continue to blossom, from a 15-year, multibillion-dollar award to an array of lucrative midsize contracts for defense and civilian agencies.

The company won approval in June 2006 for its $2 billion-plus acquisition of Anteon International Corp., a company with clients such as NATO, the Federal Emergency Management Agency and the Homeland Security Department. The deal came under intense scrutiny because of potential organizational conflicts of interest, or OCIs. The buy was characterized by Bob Kipps, managing director of Houlihan Lokey Howard and Zukin's Aerospace-Defense-Government Group in McLean, Va., as "the poster child for the government's focus on OCIs," and it proceeded only after GD divested about 15 percent of Anteon to Alion Science and Technology Corp., No. 79 on the Top 100.

As government slims its workforce and outsources key tasks, companies such as Anteon oversee contracts management and performance. The divestiture came about because, as an organic part of General Dynamics, Anteon couldn't act as both an awards overseer and contractee.

That move, Kipps said, substantially increased GD's information technology enterprise and dovetailed with the increasing fortunes of its corporate parent. "From a financial perspective, the company is performing very well," Kipps said. "Their stock is up substantially over the past year."

As a major supplier of weapons, vehicles and IT systems to the U.S. military for the conflicts in Iraq and Afghanistan, the company's revenues remain strong. Kipps said it "isn't just a one-trick pony," pointing both to its surging aerospace unit and recent and ongoing IT successes.

GD landed at No. 7 on the Top 100 list with $4 billion in prime government services revenue in fiscal 2006.

Ninety percent of GD's IT business is government-related, said Jerry DeMuro, executive vice president of the company's Information Systems and Technology Group. That's intentional; GD doesn't envision any major surge into commercial IT markets. "We're looking for the majority of our growth on the government side. That's key for us," DeMuro said. "It's the market we know best."

In April, the Justice Department awarded GD a 15-year contract for the Integrated Wireless Network. Its eventual value could amount to several billion dollars. With IWN, Justice wants interoperable wireless communications services, consolidating voice, data and multimedia communications for the estimated 80,000 federal agents and state and local law enforcement officers engaged in disaster response, protective services and homeland defense. GD is the prime contractor on a team that includes IBM Corp., M/A-Com, Nortel Government Solutions and Verizon Wireless.

In December 2006, the Marine Corps Systems Command announced a $231 million add-on contract for GD for 165 Combat Operation Centers (COCs), mobile command and control systems for regiment- and battalion-level Marine units in Iraq.

The COCs can be set up within 40 minutes and include a network of workstations that support standard tactical data systems and other mission-critical software.

The system integrates nonsecure and secret voice and data communications, voice-over-IP capabilities and networked servers. Tents, trailers, radios, power generation and other tactical hardware are also integrated for command and control that can be deployed in the air, on the ground or at sea.

In June 2006, GD was one of 25 companies picked to compete under DHS' Enterprise Acquisition Gateway for Leading Edge Solutions program. The winners of EAGLE will compete for a variety of IT-related task orders and support services.

"The IT business is clearly a priority for GD," Kipps said. "I expect they will add to it, either organically or by acquisitions. Veridian happened in '03 and Anteon in '06. They've done things in big buckets. In '07, I could see them becoming more interested in another sizeable acquisition."

General Dynamics also is preparing to compete for a contract under the General Services Administration's Alliant program, a multibillion contract that, like EAGLE, will have multiple winners competing for work. Announcement of the initial awards should come by this summer.

One key federal initiative on the GD radar is widespread implementation of Homeland Security Presidential Directive 12, which calls for a standard biometric identification card for all federal workers. Spending on the 10 largest U.S.
government identity solutions programs is projected to be $7.7 billion from 2007 to 2011, according to a January report from Stanford Group. An additional $14 billion in international government ID card programs and $250 million in state-sponsored identity solutions is forecast during that period.

"We think that's a very large market," DeMuro said. "There will be significant opportunities there. The broader your portfolio, the greater the diversification of your activities."

Profiles of the Top 20 companies in the 2007 Top 100

No. 1: Lockheed Martin's reinvention

No. 2: With SBInet, Boeing IDS takes flight

No. 3: Northrop Grumman rises to new challenges

No. 4: KBR gets down to business

No. 5: IPO catapults SAIC into a new era

No. 6: Raytheon strives for balance

No. 7: General Dynamics in full sprint

No. 8: Fluor's ready in a pinch

No. 9: L-3 leadership stays the course

No. 10 EDS, Hard-learned lesson

No. 11 CSC, Experience that counts

No. 12: Battelle seeks new frontiers

No. 13: Booz Allen, Quality over quantity

No. 14: Bechtel telecom makes a splash

No. 15: For BAE, persistence pays off

No. 16: ITT makes a push into new markets

No. 17: Dell, Talking about evolution

No. 18: Technology and service fuel IBM

No. 19: Verizon caps off a busy year with a big win

No. 20: United Technologies gains altitude

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