Despite positive earnings reports from federal IT services providers throughout 2004, the group's stock performance was mired for most of the year by the uncertainty of political elections and potential budget slowdowns.
Despite no change in strong business trends among the federal IT service companies over the past few quarters, investors have been driving stocks higher in the past couple of months.
In my view, the attributes of the government services industry reduce the risk in mergers and acquisitions to a level well below what is prevalent in other business sectors. The recent history and pace of industry transactions supports this thesis. With few exceptions, government services mergers and acquisitions have added value to the acquirers business, quantitatively, qualitatively or both.
The federal government services business, as reflected in the performance of publicly traded federal IT companies, turned in a record performance over the past year.
The federal government's spending on information technology will slow down over the next five years, but the impact on IT contractors will be minimal, according to London market research firm Datamonitor plc.
After three consecutive quarters of improvement in business performance, commercial IT spending dropped in June. Dozens of commercial software and hardware companies preannounced weak second-quarter results, blaming customer purchase delays and a lack of large sales.
Lockheed Martin Corp.'s IT division is aiming for double-digit growth, and the unit's president said that business process outsourcing is a big part of that strategy.
First quarter results in the federal IT industry were generally good, but the industry kept investors on their toes the past couple of months: A big positive earnings surprise by ManTech International Corp. was followed about a month later by a big negative earnings surprise from ManTech.
In the regulatory fallout from Enron, WorldCom and other business scandals, owners and officers of privately held IT companies may find reason to be thankful they missed the booming initial public offering market.
Between 2005 and 2007, spending on radio frequency identification technology will outpace spending on software and application development, according to a survey.
Federal government spending on information technology security products and services will increase in fiscal 2005 just 2 percent over fiscal 2004 spending.
Undeniably, the cash has flowed over the past three years as defense and government IT companies have participated in an active mergers and acquisitions market. But in an estimated one-fourth of those transactions, the flow has tended toward non-cash payments.
The telecommunications industry is once again in a state of flux. Still acclimating to the flood of competition unleashed by the 1996 Telecommunications Act and licking its wounds from a scandal-tainted 2000 market crash, the industry now must grapple with how best to deliver a wide variety of services over a changing network infrastructure.
Investor nervousness over higher interest rates, record oil prices and global unrest have pushed down most stock indexes and have pressured the shares of the federal IT firms.
Increasingly, some industry observers, analysts and investors are expressing concern about emerging risks that may derail the strong operating and stock market performance of government services companies.
