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The Pentagon’s best kept open secret

Science Applications International Corp. may be the most influential company most people have never heard of.
/ Source: The Associated Press

The signature understatement is vintage J. Robert Beyster as he mounts the podium for his annual address on a company whose low profile belies its enormous role in national security. No fanfare. No crowd-pleasing jokes. “We generally responded pretty nicely to changes in the business climate,” the 78-year-old nuclear physicist tells his employees in a gravelly monotone. Beyster’s company, Science Applications International Corp. may be the most influential company most people have never heard of.

THE FEDERAL GOVERNMENT, its main customer, often doesn’t want the public to know what SAIC is doing and, as one of the nation’s largest employee-owned companies, it escapes investor scrutiny.

Beyster and his top lieutenants are accustomed to keeping low profiles — and keeping secrets. They include the Pentagon’s former chief intelligence officer; a lead architect of the Star Wars missile defense program in the 1980s; the retired general who led the U.S. operation in Somalia in 1993, to name a few.

With 40,000 employees worldwide, San Diego-based SAIC is enmeshed in some of the government’s most sensitive work, from redesigning Army combat systems to bioweapons defense and improving electronic snooping for the ultra-secretive National Security Agency.

Though SAIC lacks the name recognition of Lockheed Martin or Raytheon, its research prowess and Washington insider connections have landed it some of the most prized government contracts.

SAIC-developed software employed by U.S. intelligence-gatherers scans newspapers, books, magazines and other documents in every major language for clues for terrorist attacks.

Other technology designed by SAIC tells soldiers where they are on the battlefield in relation to ground and air forces. Its 1,500 researchers at the National Cancer Institute in Frederick, Md., are trying to cure diseases and develop vaccines against bioterror.

The company’s work is so varied and complex that workers, about 5,000 of whom have federal security clearances, struggle to describe what SAIC does, other than to say it tries to solve the world’s most vexing and menacing security threats.

The U.S. government deems much of SAIC’s work classified, making the company difficult for outsiders to understand.

“It’s engineering, it’s IT, it’s a lot of disciplines,” said Wally Kaine, senior vice president for homeland security and a 20-year employee. “The words ’Science Applications’ really sums it up.”

Beyster started SAIC in 1969 with a handful of employees, feeling stifled as a researcher in Gulf Oil’s nuclear accelerator lab. One of the company’s first jobs was determining how a nuclear attack might affect the U.S. government.

SAIC has since posted 34 straight years of profits, and grew revenue by 2.3 percent to $5.9 billion its fiscal year that ended Jan. 31. It played the Internet boom brilliantly by buying Network Solutions Inc., a keeper of Web domains, for $4.5 million in 1995 and selling it for $3.1 billion four years later just before the bubble burst.

SAIC has had some setbacks: a soured contract with Venezuela’s monopoly oil company, heavy exposure to telecommunications, and mixed results winning technology contracts outside the U.S. government.

It has also garnered attention for its continued employment of Dr. Steven J. Hatfill in a bioweapons detection training program while he was under FBI scrutiny in the 2001 anthrax attacks.

But the biggest question looming over the company relates to one of its key assets: its founder.

Beyster, a Detroit native and engineer’s son, said in April that he would step down as chief executive officer by early next year for a more limited role as chairman.

A self-described workaholic who shows no sign of slowing down, Beyster is a larger-than-life figure inside SAIC corridors.

The Navy veteran begins his workday with an hourlong jog along the beach, perhaps with a customer or key aide. He carries several pocket spiral notebooks to jot down his thoughts and peppers staff with questions around the clock.

Ron Zollars, Beyster’s former assistant and now company spokesman, recalls hauling two or three shopping bags of reading material at a time for his boss.

Robert Young, manager of SAIC’s telecommunications business, says that each Monday he gets about 30 faxes from Beyster (who prefers fax over e-mail), quizzing him about business strategy. Many are news clippings or comments from customers with Beyster’s notes scribbled in the margins.

EMPLOYEE OWNERSHIP While most companies preach teamwork and forming a united front when dealing with customers, Beyster doesn’t mind intramural competition. Current and former employees say it isn’t unusual for two units within SAIC to vie for the same contract.

“We don’t encourage it, but we don’t exactly go crazy when we see it,” Beyster said in an interview.

Beyster’s most sacred management tenet is employee ownership.

At the end of SAIC’s latest “meetings week” — a quarterly brainstorming session of 1,200 managers — he rattled off recent accomplishments: the joint effort with Boeing Co. to redesign Army weapons; training dolphins to find mines in Iraqi ports; developing what he calls one of the world’s most complex data-mining programs for the NSA.

Beyster’s voice didn’t turn emphatic until the topic of employee ownership, which he rarely avoids in speeches.

Employees can buy and sell shares among themselves once every three months at a price fixed by an outside auditor, based on SAIC’s operating income and competitors’ stock prices. They must agree to sell when leaving the company.

Beyster insists employee ownership has persuaded workers to stay longer and allowed SAIC to escape investor scrutiny that has straightjacketed other companies. Duane Andrews, an executive vice president and former assistant secretary of defense, couldn’t agree more.

Andrews, 58, was mulling several job prospects in 1993 when he left the Pentagon, where he once oversaw the CIA’s budget. He barely knew SAIC when Beyster invited him to a quarterly management meeting in Albuquerque, N.M. After one day, Andrews was sold on SAIC’s brainpower and commitment to employee ownership.

“I got on the airplane going home and said to myself, ’These guys are different,”’ said Andrews, who now oversees about two-thirds of SAIC’s business.

At SAIC’s annual shareholder meeting this month, Beyster, SAIC’s largest holder with a 1.3 percent stake, reaffirmed plans to step down as chief executive and said the search for a successor is going smoothly.

Still, some analysts question whether he is really serious about slowing down and whether top prospects might shy away from applying, fearing a power struggle with him.

“They’ve had several people come in as senior vice presidents and heir apparents, but they never got anointed,” said Daniel Goure, a former SAIC employee who is now vice president of the Lexington Institute, a public policy group in Arlington, Va. “All those people have left because Beyster didn’t want to let go. It’s his baby.”

© 2003 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.