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SAIC will pay $1.2 billion to acquire Unisys Federal

SAIC headquarters in McLean, Va. (Jeffrey MacMillan)

Government contractor SAIC said it will spend $1.2 billion to acquire the federal contracting business of Unisys, a publicly traded IT company, in a bid to capitalize on the Defense Department’s nascent effort to build cloud computing technology into its operations.

It is the second large acquisition by SAIC in recent years; the company, based in Reston, Va., recently completed a $2.5 billion buyout of Engility, another large contractor.

SAIC chief executive Nazzic Keene said in a recent interview that both deals feed into a broader strategy to position her company as a leading provider of cloud migration services for the federal government, a line of business that includes shifting old computer systems onto modern cloud-based ones.

The Defense Department “is really in the early stages of this migration,” Keene said last week, adding: “By acquiring [Unisys Federal], SAIC will be at the forefront of this transformation.”

Unisys is based in Philadelphia, Pa., but operates its federal business out of Reston, Va. That division will now move to SAIC, adding about 2,000 employees to SAIC’s ranks, Keene said. About 75 percent of them hold high-level certifications in areas SAIC is interested in, she said. The combined company will employ more than 25,000 people, making it one of the federal government’s largest IT providers.

The deal is expected to close in May. Shortly after the deal was announced Thursday morning, SAIC’s stock jumped by nearly 5 percent, while Unisys shares soared 45 percent.

The Pentagon’s cloud strategy to catch up to the commercial tech industry

For decades, the Defense Department has relied primarily on local computer networks set up by individual agencies. The result has been a disjointed, patchwork collection of computing systems that are often walled off from one another. Such an approach can hinder the sharing of sensitive intelligence and slow the adoption of new technologies, officials have said.

The department’s most recent digital modernization strategy, however, calls for a broader shift toward an “enterprise” view of the department’s IT assets, in which technologies that are considered “foundational” are common across the services. Cloud computing in turn is viewed as a steppingstone for the application of artificial intelligence.

The cloud storage technology itself is being provided by commercial tech companies, with Microsoft and Amazon Web Services locked in a bitter fight to become the Defense Department’s primary provider.

Fierce backlash against Amazon paved the way for Microsoft’s stunning Pentagon cloud win

Rather than providing the cloud technology, SAIC wants to be responsible for providing skilled technologists who can lift and shift the department’s older computer systems onto the cloud. That work requires recoding older programs and using complicated software programs and patented methodologies.

Last month, SAIC was awarded an Air Force contract worth up to $727 million to move 800 of the service’s applications onto the cloud.

The Unisys deal follows a busy couple of days for mergers and acquisitions in the government contracting business. On Tuesday, L3Harris announced that it would sell its airport security business for $1 billion. And the shipbuilder Huntington Ingalls separately announced that it would pay $350 million for Hydroid, a manufacturer of robotic military submarines.

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