CSC buys Nichols

Officials from Computer Sciences Corp. said their company's acquisitionof Nichols Research Corp. will strengthen CSC's space and missile defensebusiness and will position it to pursue an information technology infrastructureoutsourcing deal with the Army's Redstone Arsenal in Huntsville, Ala.

CSC last week announced plans to buy Nichols, which has 3,000 employeesin 30 offices across the United States, in a stock-for-stock deal worth$391 million.

Nichols provides systems engineering, IT and technical assistance foraviation, missile and space defense systems used by military and intelligenceorganizations.

About 80 percent of Nichols' $455 million annual revenue is attributedto federal contracts, including the defense technology services it providesto Redstone Arsenal, home to organizations such as the Army Aviation andMissile Command. AMCOM is responsible for developing, testing and procuringthe Army's missiles and rockets as well as the supporting equipment neededto field them as weapon systems.Milt Cooper, president of CSC's federal sector, said Nichols, also basedin Huntsville, was attractive because of its defense and intelligence capabilitiesand its work at Redstone Arsenal.

"We looked at their record of performance and their extremely strongposition in the space and missile defense area — which we think is goingto be strongly funded in the near future — and their intelligence work,"Cooper said. "They are well regarded, and they are positioned in Redstone,where we think a lot of business will derive."

Cooper described Nichols as having "excellent past-performance credentials,"noting that past performance has become an extremely important facet ofthe best-value procurement process.

CSC wants to be well positioned to pursue the outsourcing deal, whichhas been a topic of discussion internally at Redstone Arsenal, said TomRobinson, president of CSC's defense group. CSC estimates that the contractwill be worth about $100 million when it comes up for bid in the next coupleof years, he said.

Cooper added that CSC also hopes to take advantage of "additional supportopportunities" expected to come out of Redstone, which has an overallannual budget of $15 billion.

CSC and Nichols have collaborated in the past, most recently on a contractawarded in August to provide engineering and technical support to AMCOM.As a subcontractor to Nichols, CSC's modeling, simulation and training unitwithin the company's defense sector is building complex weapon system modelsfor analysis during various kinds of simulations.

The acquisition of Nichols is CSC's first major purchase since the companybought Information Technology Solutions Inc. in March 1998, but CSC hasbeen aggressive in acquiring companies to augment its business, said GaryHelmig, principal at SoundView Financial Group Inc.Helmig said Nichols will expand CSC's horizons, because Nichols holds contractswith a different set of Defense Department customers than CSC does. He saidNichols was prompted to sell because its growth dropped to about 10 percent,which is below the industry average.

"It's getting harder and harder for the smaller IT integrators to beviable," Helmig said.