No. 6: General Dynamics on target

Defense specialist diversifies by heading into the information arena

General Dynamics Corp.

Top 100 revenue: $4.9 billion

2007 revenue: $27.2 billion

2007 net earnings: $2.0 billion

2006 revenue: $24.1 billion

2006 net earnings: $1.7 billion

Employees: 84,000

Although federal spending was mostly flat in 2007, General Dynamics Corp. found areas of growth by emphasizing a diverse customer base.

"The diversity of our portfolio has given us the flexibility to participate in markets and initiatives that are, in fact, growing at rates faster than the [command and control and information technology] markets in general," said Jerry DeMuro, General Dynamics' executive vice president of Information Systems and Technology. "The diversity has allowed us to address those emerging market needs and higher-growth areas."

General Dynamics is No. 6 on this year's Top 100 list with $4.9 billion in prime contract revenue.

General Dynamics' core IT and services business across the Defense Department and civilian agencies grew at about 10 percent, DeMuro said. The company's position on government- and agencywide contracts contributed substantially to that growth.

For example, the company won a $24 million task order from the Homeland Security Department under the Enterprise Acquisitions Gateway for Leading Edge Solutions contract to provide technology operations and maintenance infrastructure support for the Citizenship and Immigration Services agency.

The contract could be worth as much as $277 million over more than six years.
Information Systems and Technology became General Dynamics' second fastest growing segment during the past five years, according to JSA Research Inc. Work under DOD contracts, including the Warfighter Information Network-Tactical, contributed to that revenue growth.

"General Dynamics didn't have an [IT] operation 10 years ago, and now they have a $10 billion one," said Paul Nisbet, an analyst at JSA Research.

In 2007, the company won $78.3 million in initial orders from the Army for broadband network and satellite communication capabilities for soldiers in Iraq and Afghanistan. That contract could be worth as much as $1.4 billion.

Carefully tracking DOD needs is also important for maintaining the company's growth. Because of the Iraq and Afghanistan wars, much of the military budget goes to guns, armor and mobility. In a few years, that could change dramatically.

"At some point, we are going to be looking again at a national defense review, and we're going to be examining more closely peer threats like China and perhaps even Russia," DeMuro said.

General Dynamics will also partner and subcontract when it makes sense, he added.
The company is partnering with Raytheon Co. on the Army's live, virtual and constructive training operations and support systems under the Warfighter Field Operations Customer Support contract.

"The breadth of capabilities called for in some programs that we're being asked to bid on rarely can be answered by a single company," DeMuro said.

General Dynamics' strategy to be a part of big, aggregated contract vehicles is a wise decision because it gives the company a diverse customer base without requiring heavy upfront investment, Nisbet said.

The company also won a string of key awards to support the national intelligence community. "We have three or four awards there that will be valued well in excess in combination above $1 billion and approaching $2 billion in their life cycles," DeMuro said.

About the Author

Doug Beizer is a staff writer for Washington Technology.

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