General Dynamics Information Technology, a business unit of General Dynamics (GD) received a five-year contract for $83.6 million to provide information technology (IT) enterprise network services to the U.S. Special Operations Command (USSOCOM). The contract has a ceiling value of $125 million.
Through the contract, General Dynamics will provide enterprise-wide network support services to manage USSOCOM's global enterprise IT infrastructure. The support will come in the form of providing data, voice and video communications networks for USSOCOM headquarters, the service component commands, the Theater Special Operation commands and subordinate organizations. Work performed will consist mostly of systems and network engineering, operations and maintenance, and technology refreshes. The company will also operate the Global Network Control Center on behalf of USSOCOM.
Overall General Dynamics will support 75,000 users with approximately 120,000 user accounts, on multiple networks. The majority of the work will be performed at MacDill Air Force Base, Florida, and Fort Bragg, North Carolina. As a result of this contract, General Dynamics plans to hire an additional 45 employees.
Looking forward, key drivers for General Dynamics include reviving fortunes of the business jet market, its stable business of U.S. military vehicles, its backlog, an ongoing share repurchase program and strong cash flow generation.
However, the potential for large defense program cuts, a slowdown or decline in the overall defense budget, Iraq troop withdrawals, and increasing reliance on less predictable international defense business are likely to pose fundamental headwinds for the stock.
The shares of General Dynamics retain a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.
Based in Falls Church, Virginia, General Dynamics engages in mission-critical information systems and technologies, land and expeditionary combat vehicles, armaments and munitions, shipbuilding and marine systems, and business aviation. The company was ranked as the fourth largest U.S. defense contractor in terms of revenue in fiscal 2010, after The Boeing Company (BA), Lockheed Martin Corporation (LMT) and Northrop Grumman Corporation (NOC).
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