Perot plans for government growth

Perot Systems views the government market as an attractive growth opportunity, company executives told attendees this week at the JP Morgan Technology Conference.

The integration and outsourcing firm cites government as one of its key market segments, along with healthcare and off-shore services. Those areas contribute about two-thirds of the company's revenue, and anticipated turnover in the federal workforce has Perot Systems optimistic about further prospects.

"The federal government service area, for us, is a key area," said Russell Freeman, Perot Systems' chief financial officer, adding that 55 percent of civilian federal workers will approach retirement age in the next five years. "As that occurs, the government is pushing more and more of those jobs and more functions into the private sector."

"There is a human capital crisis in the federal government," said John Lyon, Perot Systems' director of finance, noting that the market for professional services in that space "looks to be very attractive."

Perot Systems boosted its federal presence in 2003 with the acquisition of Soza and Co., which doubled the size of Perot's government operations.

More recently, the company has looked to pursue business beyond the projects inherited via acquisition. Perot Systems signaled that shift earlier this year, hiring Donnie Blanks as executive vice president of business development for Perot Systems' government subsidiary. Blanks previously worked for such integrators and outsourcing firms as Affiliated Computer Services, CACI International, Computer Sciences Corp., GTE and Unisys.

Despite the positive outlook, Perot Systems' government revenue declined 3 percent in the first quarter of 2005 compared to previous year's first quarter.

"Federal government revenue was pressured," Freeman said.

One factor was the loss of a contract with the Immigration and Naturalization Service, now called Citizenship and Immigration Services. Freeman said that contract was rebundled as part of a reorganization at the Department of Homeland Security.

That contract was "rebundled by the customer along with other programs for a recompetition bid," according to Perot Systems’ May 3 filing with the Security and Exchange Commission. "The consortium of companies that we participated with for the recompete did not win this business."

The filing noted, however, that the loss was partially offset through the expansion of existing programs, including $3.1 million related to Perot Systems’ work with the Naval Sea Systems Command.