FOR SALE:Lockheed Martin IMS

December 31, 1999
By Peter Samuel

FOR SALE:Lockheed Martin IMS

Originally published in issue 45 of Tollroads Newsletter, which came out in Jan 2000.

Page:1

Subjects:sale divestiture

Agencies:Lockheed Martin IMS

Locations:DC MD

The parent Lockheed Martin recognizes IMS as a “valuable asset and an attractive investment opportunity,” he says, but it no longer fits its business plan.

“As a result the corporation is evaluating a number of strategic alternatives for LM-IMS based on a range of structures, including joint ventures, spin-off or divestiture.”

The letter says “any transaction will take some time to develop” and that any change will have “little or no impact” on the organization. Brophy cites the “seamless” transition that occurred in 1984 when IMS was created out of Datacom, an independent data services firm in an acqusition by Lockheed . He also cites the smoothness of the change when Lockheed and Martin Marietta merged in 1995, adding: “I expect any transition, if it occurs, to be equally smooth.”

Nevertheless a number of subcontractors, suppliers and customers have been warned to hold off on various projects with LM-IMS because “we may not be the people you’re doing business with next month,” or words to that effect.

The whole company, headquartered in Bethesda MD is going through considerable turmoil because of poor earnings, due in part to the vagaries of Pentagon contracting and budgeting, and to managerial problems and mistakes. The company at its Bethesda HQ has a cumbersome oversized bureaucracy, rivaling that of government agencies, some critics say. It is being radically downsized – by as much as 80% according to the WASHINGTON POST.

LM-IMS, based in Washington DC is a $600m revenue division which employs about 4500 people. LM-IMS is profitable, we’re told by an official there. It has grown at an annual 30% over the past several years, much faster than any other part of the company.

IMS took a very serious hit in 1997 when the state of California terminated a contract with its Child and Family Services unit, causing a loss that some put at $100m. State officials say that LM-IMS bungled the job and did not deliver the contracted systems. For its part LM disputed that and is still in litigation for compensation.

LM-IMS also has a Welfare Services unit, a Municipal Services unit that does car parking meters, an Enterprise Information Systems unit that does software and systems work for business and the Transportation Systems and Services unit (TSS). System integration and operations for toll authorities come under TSS and we are told this has operated profitably. One of the largest sources of revenue is the LM-IMS contract to operate the E-ZPass center on Staten Island for the MTA B&T, the state Thruway, and for now, the Port Authority. The toll work for Maryland Transp Auth and DRPA in Philadelphia ran way over contract time but it is not clear LM lost big money on these projects. The Heavy Electronic License Plate (HELP) program for truckers using ASTMv6 transponders for way station bypass under the brand name Pre-Pass apparently continues to bleed a bit of the red, but this is said to be consistent with its longterm nature .

One official told us the present effort is to sell or joint venture LM-IMS as a going concern. This would require that it be bought by a Fortune 50 company. TRW, EDS, Andersen Consultants, Raytheon, or IBM are the kinds of US companies that LM is apparently shopping IMS to.

LM-IMS TSS unit rates along with Amtech, MFS and Transcore as the leading US system integrators and services provider to electronic tolling. Of these companies only Transcore is in sufficiently decent financial to contemplate an acqusition. Transcore would look seriously at the TSS unit of LM-IMS if it were offered separately, an official there told us, but LM-IMS as a whole with the other units would make no sense. (Contact John Brophy LM-IMS 202 414 3500)

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