Next Leidos CEO will have opportunity to define the contractor

With the planned retirement of its chief executive, Reston-based Leidos will need a new leader focused on improving its profit and maintaining its prominence in a changing defense landscape, industry analysts said.

After shepherding McLean-based Science Applications International Corp. through the most significant restructuring in its nearly 45-year history, John P. Jumper said last week that he will retire once a successor has been named.

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Months after Jumper became chief executive of SAIC in early 2012, the contractor announced it would split into two pieces: a government services business that would retain the SAIC name, and a technology company renamed Leidos focused on national security, engineering and health.

Following the split, Jumper, a retired four-star Air Force general, became chief executive of Reston-based Leidos.

“I think the natural impulse would be to look for some outsider who is a celebrity to personify the company’s aspirations,” said Loren Thompson, a defense industry consultant. “I think what the business really needs is a person who understands its intricacies and is ready to participate in sector consolidation.”

Indeed, Thompson said Leidos will have an opportunity to position itself as a leader of consolidation as budget constraints intensify.

“Success in this kind of a budget environment requires really deep understanding of the federal customer and all the pressures on government spending,” he added. “I expect Leidos to lead consolidation of the defense services sector rather than to be acquired.”

But a chief executive will also have more immediate concerns, said William Loomis, managing director at financial services firm Stifel Nicolaus. He or she will have to address the disappointing results in Leidos’s first quarter as a separate company.

“The new CEO is going to want to turn that around in a big way,” Loomis said.

Still, Michael S. Lewis, managing director of the Silverline Group, a consulting firm, said an internal candidate — such as K. Stuart Shea, the contractor’s chief operating officer, or Mark W. Sopp, its chief financial officer — would make the most sense.

“It does make the transition easier,” Lewis said. An internal choice “will understand the culture of the business and will not make ... rash decisions that will actually impede opportunities for the company.”

Leidos said its board has begun looking at both internal and external candidates. Jumper has committed to stay on until a successor is named.

Jumper said he would advise the new CEO to have “the mind-set that there’s nothing broken that needs to be fixed.”

“We just need to execute the strategy that’s in place,” he said.

 
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