Week in Review

Industry Week in Review – September 2, 2011

As he bade farewell to the military Wednesday and prepares to take over as the CIA Chief, former United Stated Army, four–star general David Patraeus expressed concern that further defense budget cuts could undermine the military force he helped to shape and jeopardize the U.S. military’s ability to fight insurgencies. But, as treasury yields continue to head south and the U.S. economy fails to add jobs for the first time in almost a year this month, fears of another recession grow, precipitating a drop in all 10 sectors of the S&P 500 and all 30 of the Dow components. Such fiscal pressures and simultaneous ground wars have prompted calls to resume more conventional training and move away from Patraeus’ counterinsurgency approach, however, the general emphasized that amid “difficult” budget decisions it is imperative to build a force “that maintains the versatility and flexibility that [has] been developed [over] the past decade in particular.” As investors wait for congressional outcomes to calm market volatility, it appears the military will have to wait and do the same.

Notes on some big movers

SAIC, Inc. (Down 10.4%) – Shares are down this week after CEO Walt Havenstein, announced “disappointing” 2Q2011 results. Quarterly revenue was down 6.0% this quarter to $2.6B, operating income fell to 8.1% of revenue from 9.9% last quarter, and diluted EPS dropped $0.10 to $0.32.

Esterline Technologies Corp. (Down 9.2%) – Shares are down this week after the aerospace and defense supplier reported adjusted earnings in 2011 of less than $4.55 per share well below analysts’ estimates of $5.07 per share.

Notes on some relevant transactions

CSC acquired Maricom Systems, a provider of business intelligence and data management solutions to support mission-critical health IT systems. The acquisition expands CSC’s support of the U.S. Department of Health and Human Services’ efforts to implement IT improvements in the Patient Protection and Affordable Care Act. The deal also enhances CSC’s capabilities in the areas of healthcare informatics and data management. KippsDeSanto acted as the sole financial advisor to Maricom, terms of the deal were not disclosed.

IBM to acquire Algorithmics, a provider of risk solutions, analytics and advisory services to financial organizations and insurance businesses for $387M. The acquisition expands IBM’s analytic practices in the financial services industry and enhances IBM’s Business Analytics and Optimization capabilities.

IBM to acquire i2 Limited, a provider of intelligence analytics for crime and fraud prevention efforts based in Cambridge, UK. The acquisition accelerates its business analytics initiatives and helps clients in the public and private sectors address crime, fraud, and security threats. Terms of the deal were not disclosed.

Accelera Solutions, Inc. acquired ITS Group, Inc., an IT solutions provider specializing in virtualization solutions focused on cloud computing, desktop, application, and server virtualization. The strategic acquisition is expected to help Accelera become a leading partner in the deployment of Microsoft’s Systems Management and Messaging technologies and significantly expand its Microsoft offerings.

The Gores Group, LLC enters into asset purchase agreement with Point Black Solutions, Inc., a leader in the field of protective body armor used by military, law enforcement, and security and corrections personnel around the world. The agreement is intended to rectify the company after it filed for Chapter 11 in April 2010.

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Industry Week in Review – July 22, 2011

A debt ceiling agreement remained elusive this week, with the Senate rejecting the House’s “Cut, Cap and Balance” Plan on Friday. Nevertheless, President Obama and House Speaker Boehner seemed to be moving closer toward a deficit reduction deal cutting as much as $3 trillion in spending coupled with revenues of $1 trillion from tax code overhauls. The potential programs to see cuts remain unclear as the deadline for a deal draws closer, creating further uncertainty in the market. Other proposals on the table include Senators Harry Reid and Mitch McConnell’s incremental raise plan and the Gang of Six plan to cut the deficit by $3.7 trillion including $1 trillion in revenue increases.

Notes on some big movers:

Textron (Up 13.5%) – Shares were up for the week following strong second quarter earnings that exceeded Wall Street expectations.  Net income rose to $90 million, or $0.29 per share, beating analyst expectations of $0.24 per share. Revenue rose 12.2% to $2.48 billion, falling short of Wall Street revenue estimate of $2.83 billion.

Orbital Sciences Corp (Up 8.7%) – Shares rose as the company reported strong second quarter earnings. The company earned $0.36 per share, surpassing analyst expectations $0.22 per share, on $354.3 million of revenue, versus expectations of $328 million.

Notes on some relevant transactions:

Boeing announced Thursday that it will acquire Solutions Made Simple Inc., an information services provider for the IC and U.S. government. The terms of the deal, which is expected to close in 3Q11, were not disclosed. The transaction will further expand Boeing’s capabilities in C4ISR and cybersecurity.

SAIC announced Thursday that it will acquire Vitalize Consulting Solutions Inc., a provider of clinical, business, and IT services for healthcare enterprises. The terms of the deal, which is expected to close in early August 2011, were not disclosed. The transaction will strengthen SAIC’s existing government health solutions business and provide a dynamic channel into the commercial health provider market.

Stratos BV, a global provider of advanced mobile and fixed-site remote communications solutions, announced Thursday that it has acquired Blue

Ocean Wireless Ltd., a provider of shipboard GSM services that enables crewmembers to use personal GSM phones to communicate via voice and SMS, for an undisclosed amount. The transaction will improve Stratos’ GSM services to its global customer base.

General Dynamics announced Monday that it has acquired Network Connectivity Solutions Corp., a provider of enterprise services and cloud computing to the DoD, for an undisclosed amount. The cash transaction brings GD a prime position on the DISA Encore II vehicle and bolsters its enterprise IT solutions for DoD customers.

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