Replies to post #21146 on NeoMedia Technologies, Inc (NEOM)

[JPetroInc]

Well said ifitlooks

You obviously got it going on.

All the Best, JP

[surfvenice]

Ifitlooks... SAIC story... spent the past weekend in San Diego, It's midnight, I'm stuck at a stop light. So of course I start scanning the NEOM board on my handheld. A radio commercial comes on for SAIC... like those ads that used to run for Intel on tv, but this was on radio... touting the company and its endeveors. Something like I want to say 42,000 employees, 150 countries and in every facet of government, business, security, and listed last? Improving the way we communicate... Then the next day, baseball scores come to you from the SAIC studios....

Where will the NEOM studios be located!?

[longtime]

SAIC going public??

http://www.signonsandiego.com/news/metro/20050607-9999-1n7saic.html

By Mike Freeman
and Bruce V. Bigelow
UNION-TRIBUNE STAFF WRITERS
June 7, 2005

San Diego's SAIC, which used employee ownership as the bedrock principle in building a $7.2 billion business, said yesterday it may need a new foundation.

The research and engineering conglomerate said it has begun to study alternative ways to finance its growth – including selling shares to outside investors through a public stock offering.

With 42,000 employees, Science Applications International Corp. ranks as one of the nation's largest employee-owned companies.

Pentagon contracts account for roughly two-thirds of SAIC's annual revenue. But the defense industry is becoming concentrated in fewer companies, as reflected in the $2.65 billion buyout of San Diego's Titan Corp. announced Friday by L-3 Communications.

Senior executives say SAIC must grow to maintain its competitiveness, but its strategy to grow by acquiring rival defense contractors has become financially constrained by employee ownership.

The idea of operating SAIC as a public company, however, runs counter to the share-the-wealth corporate culture fostered by J. Robert Beyster, the nuclear physicist who founded the company in La Jolla in 1969.


Science Applications International Corp.
Most of SAIC's revenue is generated by contracts with the government, with the Pentagon accounting for almost two-thirds of annual revenue.

Headquarters: San Diego

Employees: 42,000 worldwide

Operating income: $488 million (fiscal 2005)

Revenue: $7.2 billion (fiscal 2005)

Chairman and CEO: Kenneth C. Dahlberg


Beyster, 80, maintained that the company's phenomenal growth was largely because every employee has a stake in a company's success. He retired from SAIC last year.

Beyster's devotion to employee ownership required SAIC to develop many unorthodox business arrangements, including an internal mechanism to set the price of SAIC shares. The company also created a system to enable employees to trade their shares four times a year.

If there were more buyers than sellers, the company provided additional shares of stock to meet the demand. If there were more sellers, the company would step in to buy shares.

But with many longtime employees retiring, there have been far more sellers than buyers in recent years, and the situation has become a significant drain on SAIC's available cash.

For example, last year SAIC paid $552 million to repurchase employee shares, according to the company's fiscal year 2005 documents. It paid $406 million the previous year.

SAIC has plenty of money to keep the insider-only market strong for its shareholders, executives said. The company generates about $500 million in cash each year and has $3 billion in reserves, said Chief Financial Officer Tom Darcy.

Nevertheless, the company told employees in a letter, "We are examining our capital structure to ensure that it can provide the resources we need to execute our strategic growth objectives."

The letter was signed by Ken Dahlberg, who replaced Beyster as chief executive nearly two years ago. He outlined several options under consideration, including taking on additional debt, an initial public offering or a more-limited stock placement to private investors.

Driving the move is SAIC's desire for more flexibility in raising capital for possible acquisitions. Dahlberg has said he plans to nearly double the company's revenue by 2009 – in part by purchasing rivals.

"Completing strategic acquisitions will be increasingly important to our company's future as our competition consolidates into fewer and more formidable companies, more aggressively targeting our market space," Dahlberg wrote.

The need to keep enough cash available to meet trading imbalances could hobble that strategy.

"If we use some of our cash to acquire companies, we don't want to find ourselves five or 10 years from now needing cash to support our stock system," Darcy said.

If SAIC could sell its shares instead on public markets, outside investors would provide the cash needed to gobble up rivals. That would add an important weapon to its arsenal as SAIC targets bigger, better financed companies.

"Over the long term, if you expect to be doing acquisitions, having a public security gives you an additional currency to help you execute your growth strategy," Darcy said.

At this early stage, it's unclear whether SAIC employees would vote on any proposed changes in structure.

"SAIC's management and board are evaluating capital structure alternatives, and no decision has been made regarding any specific path," spokesman Ron Zollars said. "Therefore, it is premature to speculate on whether stockholder approval would be required on any particular course of action."

Even as a quasi-public company, SAIC ranks 276th on the Fortune 500 list of the biggest U.S. companies. The surge in federal spending on defense and homeland security has allowed SAIC to bulk up into a substantial force in the defense business.

Corey Rosen, executive director of the National Center for Employee Ownership in Oakland, said employee-owned companies tend to communicate goals and information better.

They make decisions at the lowest possible level, as opposed to a top-down hierarchy. And there's less pressure from investors to pursue short-term results that could hurt the company in the long run.

Some SAIC employees have argued for years that the company's stock would be worth far more if shares traded in the public market.

In April, the last time the trading window opened for employees, SAIC's shares traded at $42.27. The window is open again for trading later this week.

SAIC announced its plans in conjunction with its first quarter financial results. The company saw revenue increase to $1.8 billion for the quarter, up 8 percent from last year.

Net income was $585 million, thanks to a one-time gain from the sale of its Telcordia Technologies subsidiary. Excluding the Telcordia gain, income from continuing operations for the quarter was $105 million, up slightly from $104 million for the same period last year.