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Capital Business
Posted at 04:51 PM ET, 08/30/2012

SAIC to split into two public companies


The SAIC logo is shown at their office inTysons Corner. (PAUL J. RICHARDS)
McLean-based Science Applications International Corp. said Thursday it plans to split into two public companies, one focused on technical services and another on information technology products, including surveillance and intelligence programs.

The move, the company said, aims to address organizational conflicts of interest, which are created when a company provides multiple services that could have opposing interests, such as building a system and then testing it.

The split is slated to be completed in the latter half of the company’s next fiscal year.

The roughly $4 billion services business will cover areas like systems engineering and technical assistance, financial analysis and program office support, SAIC said in its announcement.

The estimated $7 billion IT business — which SAIC is calling a “solutions” business — will focus on science and technology for the national security, engineering and health sectors. Communications and intelligence systems as well as electronic warfare and cybersecurity programs would be included in this unit.

The company said in its announcement that the two companies will both be able to pursue larger markets, freed from conflict of interest worries, and be more competitive in their distinct spaces.

The move comes at a key juncture for both the government contracting industry and SAIC. Other defense contractors, from McLean-based Northrop Grumman to Bethesda-based Lockheed Martin, have divested their services businesses to avoid conflicts of interest.

More recently, L-3 Communications divested its services business — now known as Engility — in an effort to improve its overall profit margins. Services, an L-3 executive said, have become less profitable as the government pursues the lowest price.

SAIC has made its own changes recently, replacing its chief executive earlier this year. It has also grappled with a high-profile contracting scandal in New York City.

By  |  04:51 PM ET, 08/30/2012

Tags:  SAIC, services, solutions, conflict of interest, government contracting

 
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