Leidos COO Stuart Shea resigns as company’s revenues continue to slide


Leidos President and Chief Operating Officer Stu Shea will step down on April 6. (Jeffrey MacMillan/JEFFREY MACMILLAN FOR WASHINGTON POST)

A leading contender to run Leidos has announced plans to step down next month.

K. Stuart Shea, the government services company’s president and chief operating officer, is resigning, according to a statement by the Reston-based company last week. Shea was widely considered a favorite to succeed chief executive John Jumper after Jumper announced plans to retire last month.

In a statement, the company said Shea’s resignation was the result of “a mutual decision reached by Mr. Shea, Mr. Jumper and the Leidos Board of Directors” but did not provide further explanation. The move follows yet another lackluster earnings report Leidos filed Thursday for the final quarter of 2014.

Profits for the fourth quarter dropped 75 percent over the same period in 2013 to $44 million (44 cents a share) from $182 million ($1.73 a share), while total revenue sank 18 percent to $1.3 billion, down from $1.58 billion during the same period of 2013. On the year, revenue was down 11 percent to $5.77 billion from $6.47 billion in 2013. (Profits in 2012 were boosted by a one-time tax issue.)

Shea’s departure comes three months after that of Joe Craver, who had led the company’s health and engineering department. Craver’s send-off also accompanied a weak earnings report, as the company posted a $7 million slump in operating income during the third quarter, with Craver’s department pacing the decline with a 20 percent dip in revenue.

Jumper, the chief executive, has since stepped in to oversee that department, but so far, business continues to lag. Leidos’s health and engineering division again suffered the steepest slump of the company’s operating units in the fourth quarter, with revenue dropping another 27 percent. Meanwhile, the company’s national security division posted a 14 percent drop.

In a statement, Jumper attributed the slide in revenues overall to “head winds from sequestration, unclear funding on awarded programs, delayed award decisions, high levels of protest activity, and continued commercial health and engineering revenue declines.”

But while federal budget cuts are surely a contributing factor, “the deterioration in results is so steep and so general that it suggests larger problems that are unique to the company,” Loren Thompson, a defense industry consultant at the Lexington Institute, a think tank in Arlington, said in an interview.

Still, Shea’s exit comes as a surprise.

A nine-year veteran of the company, he previously ran the company’s intelligence and surveillance division, and he has been credited with leading the corporate split of Science Applications International Corp. into two new businesses last fall. One, Leidos, now specializes in national security, health and engineering solutions, while the other, which maintained the SAIC name, focuses on information technology services.

Prior to joining SAIC in 2005, Shea served as a Northrop Grumman vice president in its TASC business unit.

Thompson noted that, when SAIC split in September, analysts expected Leidos to be better positioned for growth and boast healthier profit margins moving forward than its counterpart — making the company’s struggles in the past few months, Thompson said, “particularly worrisome.”

J.D. Harrison covers startups, small business and entrepreneurship, with a focus on public policy, and he manages the Post's On Small Business blog.
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