A brief history of Lockheed Martin's IT business
The roots of the IT business Lockheed Martin is divesting stretch back nearly 30 years and pre-date the merger of Lockheed and Martin Marietta in 1995.
When the two companies merged, both had significant IT work. Lockheed had units such as Datacom Systems Corp. in Teaneck, N.J., and of course Integrated Systems and Solutions in Gaithersburg, Md.
The ISS business became the platform for many of the IT-related acquisitions that followed the merger, and Gaithersburg is the headquarters for the Lockheed Martin Information Systems and Global Solutions.
When I interviewed Linda Gooden, who was the long-time leader of IS&GS, on her retirement in 2013, she told the story of her career, and it followed the trajectory of the IT business.
Her roots start with Martin Marietta where she helped convince the company to invest in IT after her unit won a Social Security Administration contract.
Prior to the merger with Lockheed, Martin Marietta acquired GE Aerospace in 1993, which brought some IT work, though looking back 22 years, it is hard to ferret out what the IT work was.
When the merger of Lockheed and Martin Marietta closed in early 1995, the company pulled together enough IT business to be the largest IT provider to the federal government, a position it has held ever since.
After the merger, the acquisitions continued. The most notable early deal came in 1996 when Lockheed Martin acquired most of Loral, which had acquired IBM Federal Systems. While there was a lot of IT in this business, there also was significant electronics work.
The dawn of the 21st century saw Lockheed Martin move more aggressively in traditional IT with the acquisition OAO Corp. in 2001. The acquisition brought Lockheed several seat management contracts which were hot commodities in the early 2000s. It also broadened Lockheed’s IT work with intelligence agencies and NASA.
Since then, hardly a year has gone by when Lockheed hasn’t made an acquisition involving IT.
In 2003, it acquired the federal government business of Affiliated Computer Services. In 2005, it acquired Stasys Ltd. and Sytex Group. In 2006, it was Aspen Systems, ISX Corp. and Savi Technology. In 2007, the acquisitions included Management Systems Designers Inc. and 3Dsolve. Eagle Group International was acquired in 2008.
Universal Systems & Technology Inc. was picked up in 2009.
The company began building on its health care IT capabilities with the acquisition of QTC Holdings in 2011 and Systems Made Simple in 2014.
Of course, the IT story at Lockheed isn’t all about acquisitions. There is also the work.
The company has taken on major projects over the years including running the desktop infrastructure though seat management contracts, managing IT support for several NASA projects, logistics support for special operations forces, and disability case processing systems.
A crown jewel is the company’s work with the FAA and the next generation of air traffic management.
But the acquisitions and the contract wins couldn’t stave off the competitive and pricing pressures the IT businesses faced.
Revenue-wise, the IS&GS sector hit a peak of $9.9 billion in 2010. It has declined steadily since then, hitting $7.8 billion in 2014.
The sale of most of its IT work will spell the end of the IS&GS sector, but there will still be IT work at Lockheed. The company is keeping its cyber and its mission IT work. But enterprise IT, air traffic management, health care IT, technical services and commercial cyber are out.
I’ll be particularly interested in the months ahead to see what the company has put into the enterprise IT bucket, and what goes into mission IT. Some of those decisions will be easy, but some surely fall into gray areas.
And what will they do if they are doing both kinds of work for the same customer? Also, how will they divvy up contract vehicles?
There is a lot of work that needs to be done even before buyers or other divestiture strategies are implemented.
With the diversity of work, it is hard to imagine a single buyer for the all the IT work it is divesting, unless they orchestrate a spinout and establish IS&GS as a standalone public company, which is what Science Applications International Corp. did to create the new SAIC and Leidos, and what L-3 Communications did when it created Engility. So, it can be done.
It seems that Lockheed has two factors to weigh – what brings it the most return for shareholders, and what sets up the IT business for success going forward.
All are questions that will be asked and answered between now and the end of the year.
Posted by Nick Wakeman on Jul 22, 2015 at 10:46 AM