Exelis Divests Military and Government Services Business

Exelis Inc., an international aerospace and defense company, divested its military and government services business in 2013, a business which had been focused on facilities management, logistics, and network communications. Exelis now joins a list of companies that have recently spun off their services business, due mainly in part to increasing price pressure and competition in services that are resulting in lower and lower profit margins. This trend has been making the services sector unprofitable in companies that have large portfolios. SAIC recently spun off its services business, as did L-3 Communications in 2012. The new, leaner Exelis is now focused more on surveillance and intelligence solutions, which represents approximately $3.4 billion in gross revenue.

The company reported $5.5 billion in gross revenue in 2012. The spinoff company, which includes the Mission Systems division, has 7,000 of the company’s total 19,000 employees. The main goal of the split is to increase return on invested capital business. After the split, the revenue from defense and commercial sales will be about 50/50 as opposed to the original 77% total company revenue that was generated from defense sales previously. Exelis was founded in 2011 as a spinoff of ITT Corporation’s defense business. ITT Corporation is a global industrial manufacturer of specialty components used in aerospace, transportation, energy, and industrial markets. Exelis is now a publicly-traded company with the following divisions: Aerostructures, Electronic Systems, Geospatial Systems, Information Systems, Mission Systems, Night Vision, and Communications Solutions.

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