SAIC’s Restructuring, Republican Convention, and Sea World
13 Comments Published by Dr. Beyster September 4th, 2012 in Politics, SAIC, San Diego.I was surprised, as likely many of you were, by SAIC’s announcement this past week about the company’s plan to split into two independent businesses. According to the articles I have read on the subject, the split will not be 50:50.
Instead, one of the resulting companies will comprise SAIC’s “solutions” business, that is, research, science, and technology for the health, engineering, and national security sectors. This company will have annual revenues of approximately $7 billion a year.
The other company will comprise SAIC’s “services” business, including systems engineering and technical assistance (SETA), program office support, and financial analysis. This company will have annual revenues of about $4 billion a year.
As you know, SAIC has been under pressure from shareholders to improve bottom-line performance. Despite revenue growth of 10 percent for the quarter ending July 31, profits for the quarter were only $110 million — considerably less than the $178 million the company earned in the same quarter a year earlier.
Investors seem to like SAIC’s plan, with the share price rising 40 cents — to $12.21 — the day after SAIC’s announcement, although it is still off from the $18.18 share price that the stock experienced the day of the IPO.
It’s a good thing I’m not in the company, because I would be strongly opposed to splitting SAIC in two. I think the great strength of SAIC is in its size, and in the diversity of talent and the synergy between all the various groups and sectors. Splitting the company will reduce SAIC’s ability to draw from its deep bench of talent and experience. SAIC works very well as an integrated company.
But I am just a voice from the past. The company is not the same one today that I founded and ran for many years, and the government contracting business has changed in the years since I left. It’s my understanding that SAIC is following the example of several other government contractors that have chosen to split along the same lines, including Booz Allen Hamilton, Northrop, and L-3 Communications, so I guess they will be in good company.
Lord knows what the split will do to the share price over the long term, whether it will create more value or less. I do know that all of us who still own SAIC stock will be watching these events closely to see how it works out. I wish both of the new companies good luck.
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I watched some portions of the Republican convention last week — it was an impressive event. Although I missed seeing Clint Eastwood’s speech, I did enjoy Mitt Romney’s. I think he is a pretty good guy. Whether he’s as good as Obama is the question. I will probably watch some of the Democrat convention this week, but I’m not as interested in it as I was to see the Republican convention.
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Last week we visited Sea World and its Shark and Turtle Reef exhibits. The trip was an enjoyable one. I have included some photos from this visit, along with some recent photos taken from my boat Solutions while we were cruising San Diego Bay.
– Bob
25 year employee, I’ve experienced both. The old seemed to realize we were human and not contract line items. I miss the old. I’m not involved directly in the contracts aspect, I can’t speak of the changes on the customer’s end. I can speak from my perspective and the worst thing that happened was going public. I don’t think the split is going to improve things only make the old company seem even better than it does now.
Synergy within the company seems to have decreased in the recent years. While there are initiatives to “cross-sell” capabilities between groups, buisness units, divisions, etc pratically speaking I’ve seldom seen it executed well. Often each unit was out on it’s own and frequently reinventing the wheels that roll easily in other areas. A drastic restructure and collapse of the internal structures was probably needed and certainly one of the options considered as the lines of which work belonged to whom were very unclear.
Could not agree more with “justnotthesame.” Especially “The old seemed to realize we were human and not contract line items.” SAIC has devolved from an employee-owned company to just another souless entity no different than any of the others.
Dear Bob,
Two comments: 1) You are still missed at SAIC and 2) I agree that going public and some of our subsequent choices as a company were not the wisest. You are right – the landscape has changed overall – but there is still a feeling among some of us of One-SAIC. Many of the current employees are feeling a little disenfranchised. We wonder what is coming next and whether we will be here to weather the next storm. Glad to see you are keeping up with us. Congratulations on your well deserved honor from UCSD.
I am a long time employee of SAIC. Due to them moving all the corporate positions back east, many people in my department are being laid off in a few months. It makes me sad to see Campus Point buildings being emptied and sold. I miss the way SAIC used to be when you were still around. It has not been the same since. I am sad we are all losing our jobs. I will miss my coworkers and the way SAIC used to be.
I’m a long time employee of SAIC. I’ve worked in San Diego for over 34 years. I look back and remember how even though the company was big, it still made it’s employees feel important and like they were an asset to the company. Maybe because we were employee owned and all felt responsibility to one another and the company, that we put our hearts and souls into our jobs. But we were happy to do it, knowing we would be rewarded in the end. It used to feel like we really were an SAIC Family all working for towards the same goals and looking out for each other. Now it’s just another big company only caring about the bottom line, not the people who actually built this company. It saddens me to see all my co-workers (and myself) getting laid off and the company we knew and loved being torn down. It saddens me to my core.
Dr. Beyster,
I never got to meet you, but I always respected the way you managed the company and always had the employees’ interests in mind.
I started with the company in 1988 in Dayton. At that time, I reported to Larry Janning, who reported to Bill Kiely in Albuquerque. Those were great times.
There was some news Thursday that kind of hit me. It was announced that SAIC was going to sell its T&E unit, based in Albuquerque, to American Systems. I’ve worked off-and-on with the SAIC AFOTEC folks in the past, so it’s going to be hard knowing they will be in another company. But, on the other hand, I’m a little jealous. The company they’re going to is employee-owned!
As you alluded to in your post, things are happening very quickly around here!
Bob:
This post to you is partly impelled by my chance meeting with Betty yesterday, but I have read your post re the proposed splitting of SAIC into two “independent” companies. I agree with you in the assessment that, under good management, it would be a mistake it split the company because it will decrease the diversity of the talent available to attack a proposed new job, as well as lessening the ease of recovery from an unexpected business setback. But it may well be that the new management feels overwhelmed by the difficult task of keeping such a complex company working smoothly, as you did in your time.
Probably since you wrote the note, we’ve learned of the acquisition of an SAIC bisiness unit, led by C. Zang, to American Systems Corp. Though I haven’t any personal knowledge of any of the people involved, I wonder if this is an attempt by the BU to bail out of what they see as a poorly managed enterprise. Perhaps not so incidentally, American Systems is an employee-owned company.
My name is my employee number. Five digits starting with a 1. I miss the old days. Dr. Beyster’s retirement and the IPO killed the corporate culture. Last week I sold all of my stock. I’m in a BU that will be amputated like dead flesh and probably be taken over by someone like Carlyle. We were the core of the original SAIC.
Bob;
I have griped about SAIC going public in the past. You may even remember me communicating with you long after the smoke settled.
I am still completely angry at Dahlberg and his darlings taking this company public after you were out of the picture.
The so-called smart employees of this technical company were ignorant when it came to protecting one the GREATEST employee owned companies the world has ever known. I remember trying to get people to listen on teleconferences, but they trusted that you would not let anything bad come of your company.
SAIC deserves the misery it has bestowed on itself for allowing the public stock market to take it over.
Interestingly, my daughter now works for SAIC. She knows the past and she doesn’t plan on making a career there, just earning some income while gaining experience.
I am truly saddened that your great company died in this way; you deserved a more fitting legacy.
Jim: Thanks for your post on my blog. I too am disappointed with the decision to split up SAIC. I always believed our great strength was in our breadth and depth of talent. I wish your daughter well. — Bob
Wow, just found out, I won’t be SAIC any longer. The new company name was announced. I sure hope they did not pay anyone to come up with it because IMHO, it’s BAD. No one will pronounce it correctly, the first letter was given to us as lower-case and it’s another “made up word” like so many companies such as “Verizon”. I hate it. The dumb name is just the beginning. The next will be when we get purchased at bargain basement prices and many good people will lose their jobs. I knew this split was bad, now it’s the worst. Very unhappy. I should just go 1099 and distance myself even more.
justnotthesame: I agree with you that splitting up SAIC is not a good idea. There’s power in the company’s size. — Bob