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SAIC To Spin Off Technical, IT Government Services Business

Aug. 30, 2012 - 06:18PM   |  
By Zachary Fryer-Biggs   |   Comments
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Science Applications International Corp. (SAIC), the world’s 12th largest defense contractor, will be divesting its government “technical” and IT services business, the company announced in a press release Aug. 30. SAIC will make the split in the form of a spin-off during the second half of 2013.

The company will break off a publicly traded company, which will be a pure-play government services business, while keeping its larger science and technology solutions business and focusing on the national security, engineering and health markets.

The plan mirrors one employed by L-3 communications, which spun off part of its services business in the form of Engility earlier this year.

“Our two new companies will be designed so that their businesses can be more differentiated and more competitive in their own space,” SAIC CEO John Jumper said in the press release announcing the move. “This affords both companies an excellent opportunity to combine optimized cost structures, unrestricted access to their respective markets, and the leveraging of decades of SAIC’s scientific and engineering excellence to unleash the growth and value we can deliver to our customers, employees and shareholders.”

The announcement comes the same day that the company released its second quarter financials, which revealed that the company’s net profit after taxes dropped 38 percent to $110 million compared with the same quarter last year. Discontinued operations accounted for a large portion of the difference, and the financials also revealed that revenue had climbed nearly 10 percent to $2.8 billion. SAIC’s Defense Solutions Group led the charge with a 14 percent increase in revenues.

SAIC projects that the segments of the company that will be organized into the new technical services business will bring in about $4 billion in revenue through the end of this fiscal year, while the segments in the remaining science and technology solutions business will bring in about $7 billion. Last year, the company’s total revenue was $10.7 billion. Both new companies would likely be among the world’s top 20 defense contractors.

The reorganization comes less than half a year after Jumper, former U.S. Air Force chief of staff, took over the reins of the company.

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