SAIC Splitting the Baby

Defense services giant SAIC made the announcement yesterday that it was splitting into two independent, publically-traded companies — a technical services business and a solutions-focused business.

“In this next step of our strategic plan we configure ourselves for the future. Our two new companies will be designed so that their businesses can be more differentiated and more competitive in their own space. More importantly, that addressable space will expand for each as we eliminate the burden of organizational conflicts of interest (OCI),” John Jumper, chairman and chief executive officer, said in a company press release. “This affords both companies an excellent opportunity to combine optimized cost structures, unrestricted access to their respective markets, and the leveraging of decades of SAIC’s scientific and engineering excellence to unleash the growth and value we can deliver to our customers, employees and shareholders.”

According to the press release the two companies are expected to:

• Unlock substantial value by removing both the potential and the perception of organizational conflicts of interest that now prevent pursuit of new business in both the services and the solutions markets.
• Enable internal efficiency by managing distinct businesses differently, producing more cost competitive offerings and unlocking potential for increased revenue and margin performance.
• Deliver better differentiated systems and solutions to customers by focusing our investment where it’s needed the most, to deliver the greatest impact to customers’ missions.
• Open new opportunities for employees through growth in leadership positions through expanded market share.
• Provide investors with a more focused and compelling view of our businesses and their growth potential.

“We feel that SAIC is now well positioned to leverage its strong market position in both the solutions and services businesses, including several high growth markets, and it is time to enact the next step in our strategy,” said Chief Operating Officer Stu Shea. “Competitive conditions warrant a more efficient cost structure, and increased competition requires us to operate in unconstrained environments, free of OCI and other impediments. We believe this separation will create value for our stockholders by unlocking the full growth potential of SAIC.”

SAIC’s website states that the company has 40,000 employees that serve customers in the U.S. Department of Defense, the intelligence community, the U.S. Department of Homeland Security, other U.S. Government civil agencies and selected commercial markets. SAIC had annual revenues of approximately $10.6 billion for its fiscal year ended January 31, 2012

(Gouge: Politico.com’s Morning Defense)