Reshaped Litton group eyes dividends

The reorganization of Litton Industries Inc.'s Information Systems Group

into four separate divisions will position the company to move more quickly

on new business and to grow internally and through acquisitions, company

officials and industry analysts say.

Litton announced Dec. 5 it would reshape its Information Systems Group

by splitting Litton PRC Inc. into three customer-focused divisions and creating

a fourth division from Litton TASC Inc. The $1.5 billion group will share

centralized administrative and marketing resources.

"The new structure is the next logical step in the organization's move

to be more competitive," said Mike Brown, chairman and chief executive officer

of Litton Industries, in a Dec. 6 briefing to analysts about the company's

first- quarter financial results. Earnings-per-share were down slightly

from the first quarter last year, but revenues rose from $1 billion last

year to $1.1 billion.

The new divisions are:

* Litton PRC Government Solutions Division.

* Litton PRC Defense Systems Division.

* Litton PRC Maritime and Range Systems Division.

* Litton TASC Division.

The shift will create four operating units of roughly equal size and

make it easier to respond to changing markets and to leverage the resources

of the whole organization, a Litton PRC spokesman said. No employee layoffs

are planned, he said. Litton will look for opportunities to grow internally

and through acquisitions.

Litton's Information Systems Group could grow at a faster rate than

the overall 3 percent annual growth that is expected in the federal IT

market be-cause of higher margins in emerging e-solutions in Litton's

areas of expertise or current business offerings, said Ronald Sugar, Litton's

president and chief operating officer.

With the right targets in government, Litton can increase its services

business more quickly than its product side, which will make Wall Street

analysts and investors more excited about the company, said Jerry Grossman,

managing director at Houlihan Lokey Howard & Zukin, an investment banking

firm.

"Litton has not been an aggressive acquirer in the Information Systems

Group," Grossman said. "They are examining their strategy and may move

ahead with acquisitions more quickly." Grossman suggested that Litton could

look for an acquisition of one of the few companies left in the $100 million

to $1 billion revenue range, such as CACI International Inc. or a public-sector

IT integrator.