WT Business Beat

By Nick Wakeman

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Apples to apples at GEIA

It was an unseasonably warm fall day when I pulled into the Waterford Conference Center in Springfield, Va., where the Government Electronics and Information Technology Association was holding its 2007 Vision Conference in mid-October.

A pleasant surprise was that I didn't have any trouble parking. We all know parking at conferences can be, well, grim, to put it mildly. Maybe that was because I was attending afternoon sessions. So I settled down in my seat not realizing that I would come out understanding more about the public sector and its role in the economy than when I went in.

What grabbed me were a couple of the first slides shown in an industry overview presented by Alex Vacca, an analyst for Northrop Grumman Corp. A lot of people, including me, who aren't defense and information technology industry insiders, hold the mistaken belief that these are the biggest companies in the nation. We think they get the biggest slices of the pie.

Not so.

Vacca put a chart on the screen for the audience titled "The Public Universe: Over $300B." The next slide, "The Universe in Perspective," showed the market capitalization of the giants of the commercial sector in billions juxtaposed against the all of the major IT and defense systems integrators combined.

Let me take a stab at explaining market capitalization. It's the measurement of corporate or economic size equal to the share price multiplied by the number of shares outstanding of a public company. Basically, it's a reflection of the value of the company and how much it is worth. When the numbers are tallied, defense and IT companies have a market capitalization of more than $300 billion.

The "Universe in Perspective" slide was intended to show that even using a very broad definition of the defense industry, the entire industry is still valued at less than a number of big commercial sector companies, Vacca told me later. The valuation not only included most of the universe of defense and IT companies serving the public sector, but also all of Boeing Co.'s and BAE Systems Plc's commercial work, too.

Juxtaposed against the defense and IT conglomerate in the bar graph were four other giants of the American economy and their respective market capitalizations. Apple had market capitalization of more than $100 billion, Microsoft had about $300 billion, General Electric had more than $400 billion and Exxon Mobil soared the highest to more than $500 billion.

That should put things in context. Next time you think the aggregate dollars from government IT and defense enable those companies to dominate the economy, think about other sectors. You'll have a better perspective on things and shake free of the misconception that the economic scales are tipped in favor of defense and IT businesses.

Posted by William Welsh on Oct 31, 2007 at 9:54 AM

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