The Washington Post

General Dynamics profit collapses

Falls Church-based General Dynamics reported Wednesday that its fourth-quarter earnings plummeted to a loss of $2.1 billion, suggesting that some of the area’s top local contractors may be hitting tougher times.

General Dynamics attributed much of the dramatic fall to a $2 billion goodwill impairment charge the company took in connection with its information systems and technology group, which it said is being hurt by “slowed defense spending.”

The technology services businesses of many defense companies, including competitors Lockheed Martin and Northrop Grumman, have come under pressure in recent months. These already lower-margin businesses operate on shorter cycles than major weapons programs, like ships and tanks, making them easier to cut more quickly.

As the government has pushed to buy the most inexpensive proposal — rather than the traditional “best value” -- contractors have reported an increasingly challenging market.

At General Dynamics, the IT group includes basic technology services as well as its cyber business and a communications and networking group that includes space systems.

“We are not pleased with the considerable decline in margins in this group,” said Phebe Novakovic’s, the company’s chief executive, in a call with investors Wednesday. “The performance was disappointing at best and will be addressed.”

For the three-month period, General Dynamics reported a loss of $2.1 billion ($6.07 per share), a steep decline from profit of $603 million ($1.68) in the same period a year earlier. Quarterly revenue declined nearly 12 percent over 2011, to about $8.1 billion.

For the year, the company posted a loss of $332 million (94 cents per share), down from profit of $2.5 billion ($6.87) in 2011. Annual revenue declined 3.6 percent, to $31.5 billion.

General Dynamics is set to hold a call with investors late Wednesday morning. Lockheed Martin plans to announce its earnings tomorrow, while Northrop Grumman is set to report next week.



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