SAIC plans split into 2 public companies
MCLEAN, Va. (AP) — Science Applications International Corp. said Thursday it will separate into two publicly traded companies, with one business focused on science and technology for national security, engineering and health clients and the other on government technical services and enterprise information technology.
The science and technology business will have about $7 billion in annual revenue, SAIC said, while the government technical services business starts with about $4 billion in revenue per year.
It said that by splitting, the companies will avoid real and perceived conflicts of interest that could prevent them from winning business. They will also be free to pursue different business strategies and would be more efficient than the combined company.
SAIC plans to conduct a tax-free spinoff late in its next fiscal year, meaning the businesses will separate in late 2013 or early 2014. SAIC said the two separate companies will pay dividends that are about equal to the combined company's current dividend. The McLean, Va., company initiated a quarterly dividend of 12 cents earlier this year. The final spin-off is subject to approval by the board.
SAIC also reported stronger-than-expected revenue in its fiscal second quarter and raised its annual revenue forecast. However, its net income was hurt by unfavorable changes in contract estimates.
The company said its net income sank 37 percent to $108 million, or 32 cents per share, from $171 million, or 50 cents per share. Changes in contract estimates helped its results a year ago but reduced its income in the most recent quarter, which ended July 31. Revenue rose 10 percent to $2.85 billion from $2.6 billion.
Analysts expected the company to report net income of 33 cents per share and $2.67 billion in revenue, according to FactSet.
SAIC said its defense revenue rose 14 percent to $1.24 billion, and intelligence and cyber security revenue rose 8 percent to $919 million. Revenue from its health, energy, and civil solutions division grew 5 percent to $692 million. The company said it booked $2.2 billion in business during the quarter.
The company still expects net income of $1.26 to $1.36 per share for the fiscal year ending Jan. 31. It now says revenue will be between $10.9 billion and $11.4 billion, up from its previous estimate of $10.7 billion to $11.2 billion. While SAIC expects more revenue, it also anticipates greater expenses related to the split of its business.
Analysts expect the company to post net income of $1.34 per share and $10.91 billion, on average.
SAIC stock jumped $1.14, or 9.7 percent, to $12.95 in after-hours trading. The shares rose a penny to $11.81 Thursday. Over the past year, the stock has traded between $10.30 and $15.18.