3
Second Quarter 2013
Industry Trends
(Defense and Gov. Services)
Source: Public Filings; Industry Newswires and Capital IQ as of 06/28/13
Company
Leadership Change
Andrew Teich succeeded Earl Lewis as
President & CEO of FLIR Systems.
Dave Schmitz was appointed as
President of Cubic Corporation.
QinetiQ North America appointed Gary
Slack as President, COO and Interim
CFO.
Lou Von Thaer was named President of
SAIC’s National Security Sector.
Former COO of BAE Systems, Larry
Prior, joined CSC as VP & GM of the
defense and intelligence group.
Sotera appointed Deborah Alderson as
President & CEO.
Significant Leadership Changes
The Snowden Effect
Following the signing of the Continuing Resolution (CR) by President Obama, contractors have
enjoyed improved visibility and accelerated contracting activity compared to the murky
uncertainty that highlighted Q1. While contractors have largely reported feeling insulated from
the sequester thus far, government officials maintain that firms will encounter the full effects of
the spending cuts. Defense Secretary Chuck Hagel warned a Senate subcommittee that
government contractors will shoulder some of the burden of sequestration in the near future, and
predicted a “sharp drop” in the number of contractors by the end of 2013. This follows Hagel’s
recent requirement to subtract an additional $37 billion from the DoD budget for the remainder of
fiscal year 2013.
Due in part to improved visibility, 2013’s second quarter played host to a number of leadership
changes amongst the nation’s largest government contracting firms. Most notably, Sotera
Defense Solutions appointed Deborah Alderson as President & CEO, and Cubic Corporation
named Dave Schmitz the successor to Brad Feldmann as president of Cubic Defense
Applications. The multitude of leadership changes is due to a number of factors; however, the
turnover of executives largely signals the need for firms to adjust their strategic positioning to
adapt to federal spending cuts.
Likely the most publicized event of Q2 was Booz Allen
Hamilton technician Edward Snowden’s leak of top-secret
NSA documents to The Guardian newspaper. The leak
revealed the interception of US and European telephone
metadata and the PRISM and Tempora Internet surveillance
programs.
The long-term impact of Snowden’s disclosures on national
security and government contractors within the Intelligence
Community (IC) remains unclear. However, Intelligence
agencies have detected that members of targeted militant
organizations have begun altering communications patterns
in what is believed to be a direct response to Snowden.
Meanwhile, despite fear that Snowden's disclosures could
create momentum on Capitol Hill to review the use of
contractors, attention has instead been directed at the
processes used to issue security clearances.
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
Jun 3, 2013
Jun 8, 2013
Jun 13, 2013
Jun 18, 2013
Jun 23, 2013
Jun 28, 2013
Booz Allen Hamilton
S&P 500
TMG Defense & Government Servies Index
Wed, Jun 5:
The
Guardian publishes
Snowden's leak
.
Thur, Jun 6:
A
second story
reveals the
existence Prism.
Sat, Jun 8:
Snowden's
leaks details of NSA tool
Boundless Informant.
Sun, Jun 9:
Snowden goes
public with a
video interview.
Wed, Jun 12:
South China
Morning Post publishes the
first interview with Snowden
since he revealed his identity.
Fri, Jun 14:
The Home
Office prohibits Snowden
from boarding any flights to
the UK
.
Thur, June 20:
Top secret documents
published show how the NSA makes use of
information "inadvertently" collected from
domestic US communications without a
warrant.
Fri, Jun 21:
The US files
espionage charges
against Snowden.
Sun, Jun 23:
Snowden leaves
Hong Kong on a
flight to Moscow.
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