Booz Allen Weighs Splitting Operations

Chief executive Ralph Schrader told employees in an e-mail about a possible new strategy. (Adam Berry - Bloomberg News)

Booz Allen Hamilton, the big technology and consulting firm in McLean, is strongly considering splitting into two companies.

In meetings in recent days, senior executives have "expressed strong support for a new strategic direction that could lead to our commercial and US government businesses operating as separate firms in the future," according to an e-mail to employees from Ralph W. Shrader, the chief executive and chairman.

Shrader wrote that the commercial and government units "have very different needs" and the "long-term success of our two major businesses -- and our clients and people -- could be enhanced by complete focus on their distinct markets."

A Booz Allen spokesman said Shrader was unavailable for comment yesterday. The memo offered no details on how the separation might be accomplished, and the spokesman declined to discuss the company's plans.

Booz Allen is among the top government contractors in the country and is one of the largest employers in Northern Virginia, with more than 11,000 employees in the region. On the commercial side, the firm is a well-known source of market research, such as surveys of salaries. For several years, it was the title sponsor for the men's professional golf tournament in the Washington area.

Booz Allen is privately held -- owned by roughly 300 senior executives -- and discloses little information about its finances. Last year, it did roughly $4 billion in sales, half of which was with the government.

Of its 20,000 worldwide employees, 80 percent work on government projects. Major clients include the Air Force, Navy and U.S. Agency for International Development. The other 20 percent of its people, who are based in New York, focus on commercial work with clients that have included Dow Jones and the College Board.

Booz Allen went public in 1970, but six years later, the company's senior executives took the company private.

In his memo, Shrader characterized discussions over splitting the company as being in the "development stage." Shrader wrote that the two units are performing well but face vastly different business models and regulatory requirements.

The company has coped with the differing needs by having two separate operating entities.

On Internet message boards and elsewhere, Booz Allen employees have been feverishly speculating about the future of the company. One topic of discussion has been whether the government or the commercial unit would be sold to a private-equity company.

Senior Booz Allen executives met on Thursday and Friday to discuss their strategy, and followed that meeting with a call to top executives around the world on Saturday.

The company is now exploring its options, Shrader wrote, and hopes to come to a decision by the end of March.