Founder Fuels a Quiet Success Story at SAIC
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 much external scrutiny.
Beyster is accustomed to keeping a low profile, and keeping secrets -- as are his top lieutenants, who include a former Pentagon chief intelligence officer, a lead architect of the Star Wars missile defense program, and the retired general who led U.S. operations in Somalia in 1993.
With 40,000 employees worldwide, San Diego-based SAIC is involved in some of the government’s most sensitive work, from redesigning Army combat systems to bioweapons defense to improving electronic surveillance for the National Security Agency.
Though SAIC lacks the name recognition of Lockheed Martin Corp. or Raytheon Co., its research prowess and Washington connections have landed it some of the most prized government contracts.
SAIC-developed software used by U.S. intelligence gatherers scans newspapers, books, magazines and other documents in several languages for clues on terrorist attacks.
Other technology designed by SAIC tells soldiers where they are on the battlefield in relation to ground and air forces. The company’s 1,500 researchers at the National Cancer Institute in Frederick, Md., are trying to cure diseases and develop vaccines against bioterrorism.
Much of SAIC’s work is 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. “The words ‘Science Applications’ really sums it up.”
Beyster started SAIC in 1969 with a handful of employees because he felt stifled as a researcher in Gulf Oil’s nuclear accelerator lab. One of his company’s first jobs was determining how a nuclear attack might affect the government.
SAIC has since posted 34 consecutive years of profit. Revenue grew by 2.3% to $5.9 billion its latest fiscal year ended Jan. 31. It even played the Internet boom 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, including a soured contract with Venezuela’s monopoly oil company, heavy exposure to telecommunications and mixed results winning technology contracts outside the U.S. government.
But the biggest issue looming over the company relates to its founder.
Beyster, a Detroit native and engineer’s son, said in April that he would step down as chief executive by early next year for a more limited role as chairman. But analysts question whether Beyster will relinquish control when the time comes.
A self-described workaholic who shows no sign of slowing down, Beyster is a larger-than-life figure inside SAIC corridors.
While most companies preach teamwork and forming a united front when dealing with customers, Beyster doesn’t mind intramural competition. Some who have worked at SAIC say it isn’t unusual for two units within the company 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; and 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 straitjacketed other companies.
At SAIC’s annual shareholder meeting this month, Beyster, SAIC’s largest holder with a 1.3% stake, reaffirmed plans to step down as CEO and said the search for a successor is going smoothly.
Still, some analysts question whether he is 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.”
