ACS to sell federal business

Affiliated Computer Services Inc., a technology outsourcing firm based in Dallas, Texas, is planning to sell its federal government business.

ACS is in late-stage discussions with a buyer, according to its quarterly report, released this week. Company officials declined to say why ACS, well-known in federal circles, wants to sell the federal business.

"The federal government sector only accounted for a little bit more than 20 percent of our business," said Lesley Pool, senior vice president and chief marketing officer. "Our larger concentration is in state and local [government]."

According to the company's financial filings, federal government sales brought in $217.6 million in revenue for the quarter ending June 30, which is the fourth quarter in ACS's fiscal year. State and local government sales accounted for $463.9 million and commercial sales $332.7 million.

ACS also reported its lowest profit margin, 7.7 percent, from federal sales, with an operating income of $16.1 million. It netted $79.2 million from state and local government, a 17.1 percent margin, and $58.8 million from commercial customers, a 17.7 percent margin.

ACS officials would not identify the potential buyer.

The Defense Information Systems Agency in July awarded ACS a place on I-ASSURE II, an information assurance contract vehicle worth up to $1.5 billion for the 11 contractors who have a stake in it. The fate of such existing business, if there were to be a sale, would vary, Pool said.

"What would typically happen is you have to reassign or transfer or reprocure or requalify, and it's different on every contract," she said.

The company is also in talks to purchase a commercial information technology business, according to the quarterly report.

It is an unusual time for a company to sell off a federal business, said Larry Allen, executive vice president of the Coalition for Government Procurement.

"Right now you'd think it was a nice core piece of business to have. The federal government is one of the markets that's buying right now," he said. "On the other hand, maybe they feel that now is a good time to bring in some extra cash."

ACS reported $1.014 billion in revenues for the quarter. That represents an 18 percent increase over the $857 million it reported in the same quarter a year ago. Net profits rose 34 percent, from $229.6 million to $306.8 million.