SAIC to leverage Boeing fed work

Science Applications International Corp. has been busy buying up small technology companies at the rate of more than one per month since January, but it had not shopped in the federal marketplace until this month, when it announced plans to buy Boeing Information Services Inc.

SAIC's purchase of Boeing IS, whose revenue comes almost exclusively from federal contracts, is SAIC's seventh acquisition since the beginning of 1999. SAIC, the largest privately held federal systems integrator, will pay an undisclosed amount of cash for the subsidiary of Boeing Co.

"We believe the two groups together bring a critical mass of people," said Duane Andrews, corporate executive vice president of SAIC. "We are going to leverage that to go after a lot more outsourcing."

Boeing IS has sharpened its systems integration and network management skills in developing the Army's Reserve Component Automation System (RCAS) of 50,000 workstations at 5,000 sites across the country, according to SAIC. In May, the Health Care Financing Administration selected Boeing IS as one of 12 companies to help the agency stop Medicare waste and fraud under a five-year contract.

In the purchase, SAIC picks up 1,200 employees, 70 percent of whom are engineers or technicians, and projected revenue of $300 million in fiscal 1999, most of it coming from Defense Department and NASA contracts. That includes all the computing support for NASA's headquarters, ranging from developing system solutions to providing their networks and desktop services, said William Delaney, president of Boeing IS.

Boeing IS also has major service contracts with the Defense Information Systems Agency, NASA's Goddard Space Flight Center, Kennedy Space Center and Stennis Space Center, and the Navy's China Lake, Calif., research facility.

SAIC has teamed with Boeing IS as a substitute on RCAS and on the Defense Information Systems Network Defense Support Services-Global pact to support the deployment of a worldwide Asynchronous Transfer Mode network. Each of those contracts is worth more than $1 billion.

Boeing IS holds some excellent contracts, said John Allen, vice president of Quarterdeck Investment Partners Inc. "The issue is," he said, "can they sustain the business they acquire as it comes up for recompete?"

Allen said SAIC, which has funded its shopping spree with the proceeds of taking Network Solutions Inc. public in the fall of 1997, has a history of buying entrepreneurial companies and making sure they are not subsumed. Not many companies that are major players in the federal IT marketplace have had much success sustaining the entrepreneurial spirit after buying up smaller companies, Allen said.

Boeing IS was formed in 1994, evolving from a computer services group that had existed within Boeing since the 1970s. But the Seattle-based aircraft builder, looking to focus on its core competencies, decided late last year to shop Boeing IS around, Delaney said. SAIC heard that Boeing wanted to sell its subsidiary in January and responded immediately, Andrews said.

Delaney said Boeing IS customers will receive the same support once the group is taken over by SAIC. He also noted that the top eight managers of Boeing IS will transfer to SAIC as part of the transaction. No layoffs are planned, Delaney and Andrews said. If the deal receives the blessing of federal regulators as expected next month, Boeing IS will become a sector of SAIC, and Delaney will manage it.

McBride buys former Cordant

Another consolidation in the federal systems integrator market was announced this month. McBride and Associates Inc., a private company based in Albuquerque, N.M., bought Marconi Enterprise Solutions Inc., a subsidiary of Marconi North America and the British electronic and telecommunications conglomerate General Electric Co. PLC, for an undisclosed amount.

Marconi Enterprise Solutions was formed through the 1998 acquisition of Tracor Enterprise Solutions, which had acquired Cordant Inc. in 1996.

"We think they are a good fit. They have strengths where we needed them, and we bring strengths where they need them," said a McBride official, who asked not to be identified.

Terms of the deal were not disclosed, but the official said there would be no layoffs among the 60 employees now with Marconi Enterprise Solutions or the McBride employees.