This summer, some of the largest defense contractors such as Fall Church-based General Dynamics, Northrop Grumman and Bethesda-based Lockheed Martin have been facing new challenges with their information technology businesses as the government adjusts to tight budgets and the potential for even more cuts, reported Washington Post’s Capital Business.
These companies include four important operating divisions: an aerospace group which creates business jets; a combat systems unit that builds military vehicles and equipment; a marine systems group that builds submarines and ships; and an information systems and technology division that builds communication systems, designs and develops networks and collects and processes intelligence.
Unfortunately these companies’ information systems and technology business is under the most pressure, which includes IT services, cybersecurity and battlefield communications equipment. As much as cybersecurity seems like an arena inoculated from major cuts, all professional services, with their tighter profit margins, will be at risk.
General Dynamics reported that their income fell from $653 million to $634 million. Quarterly income slightly grew to $7.92 billion, however, the information-systems business was the only one of the four divisions to see profit as well as sales decline.
IT services is usually a business that doesn’t create the kind of profits seen in other divisions such as marine systems or military equipment. However, business has become even tougher in recent months. Spending has slowed down and the government has started to choose the lowest-priced offering instead of looking for the “best value.” IT work has also taken a share of budget cuts since it’s a “short-cycle” business.
Other companies such as Lockheed Martin faced a similar issue as General Dynamics. Their information systems and global solutions business saw its sales and profits drop. However, Lockheed Martin reported a profit increase from $742 million to $781 million for a three-month period. Their quarterly revenue increased 3.3 percent to $11.92 billion.
Northrop Grumann’s report systems unit had the biggest decline in sales. Their quarterly revenue declined about 4 percent to $6.27 billion. However, the division continues to reshape its business increasing its profit margin from 9.3 percent to 10.9 percent for the quarter.