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SAIC’s 700 Job Cuts Hit Home With 50 Local Reductions

SAIC INC.

CEO: John Jumper.

Revenue: $8.5 billion for nine months in FY 2013; $8 billion for like period of FY 2012.

Net income: $339 million in first nine months FY 2013; $220 million for like period of FY 2012.

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No. of local employees: 3,100.

Headquarters: McLean, Va.

Year founded: 1969.

Stock symbol and exchange: SAI, New York Stock Exchange.

Company description: Diversified technology and engineering firm that obtains about 90 percent of its revenue from contracts with federal government agencies.

SAIC Inc., which once made its home in San Diego but is now managed from McLean, Va., reported it will be cutting another 700 jobs from its payroll, including 50 in San Diego.

“While these decisions are painful, they are necessary to meet competitive demands, customer cost expectations and effectiveness, and to deliver financial performance for our shareholders,” said CEO John Jumper.

SAIC spokeswoman Melissa Koskovich said in an email that the 700 reductions will occur “across the ranks and in many locations.” Later, she said, “approximately 50 individuals would be impacted in San Diego.”

The company is providing training, coaching and support to the affected employees. The cuts are not directly related to the sequestration, Koskovich said.

Sequestration is the term used to describe the approximately $1 trillion in cuts to the nation’s budget over 10 years that will take effect Jan. 2 unless Congress comes up with another plan. Local defense industry sources say the cuts would result in the elimination of some 30,000 jobs in San Diego.

SAIC, which was founded here in 1969, has been gradually reducing its staff even before it relocated its headquarters to Virginia in 2009. At that time, SAIC had about 4,500 local employees as part of its global workforce of about 41,000.

In its most recent communication with this paper, SAIC said it had about 3,100 local employees. In an earlier statement at mid-year, Koskovich said there were 2,900 employees in the county.

In June, the company said it was eliminating 450 positions from its San Diego corporate staff and moving the jobs to McLean.

Uncertain About Impact

Ben Haddad, SAIC’s community relations director, said he was unaware how the most recent job reductions would play out locally.

Haddad knew that the company was shrinking its offices here, but couldn’t say how many buildings it leases. Last year, SAIC sold two buildings and it was looking to sell another this year, according to earlier communiques with Koskovich.

SAIC announced in August that it’s splitting itself into two independent and publicly traded companies. One would be a solutions focused unit, dealing with cyber security and ISR (intelligence, surveillance and reconnaissance); energy; environment and infrastructure; and health information technology.

The other unit would encompass technical services including traditional C4 systems (command, control, communications and computers); training and system integration work.

The company said that splitting the company will help it avoid “organizational conflicts of interest” that impedes its ability to capture more government business. For example, there’s been perceived conflicts when SAIC was hired to come up with recommendations on proposed systems for government clients, and then was awarded contracts to supply those systems.

Analyst Perspective

James Friedman, an analyst with Susquehanna Financial Group in New York, said splitting the company could expand its addressable market by $1 billion. He said once the split occurs, which is expected in the second half of 2013, SAIC could win 20 percent of that market, and add 4 cents per share to its profits. Friedman rated shares of SAIC as neutral or a hold.

In its fiscal 2013 third quarter that ended Oct. 31, SAIC reported revenue of $2.87 billion, up 3 percent from the like quarter of the prior fiscal year. Net income for the quarter was $112 million, compared with a net loss of $89,000 in the like quarter of FY 2012.

For the nine months of FY 2013, SAIC reported revenue of $8.5 billion, up from $8 billion in the like period of the prior fiscal year. Net income over that time was $339 million, compared with $220 million in the prior year’s nine months.

SAIC forecast its year-end revenue will finish between $10.9 billion and $11.4 billion, while diluted earnings per share will range from $1.49 to $1.54. That’s up from the previous guidance of $1.26 to $1.36 earnings per share.

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