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That’s not the only problem with general dynamics chip supply-Washington Technology

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That’s not the only problem with general dynamics chip supply.

But it’s still enough to impact the second quarter

There aren’t enough computer chips in the world for reasons that are too long to list and complicated to do here. But one reason is that much of everything in the world runs on computer chips.

Includes virtually all defense electronics as the U.S. Government Consider ways to return more chip manufacturing to the United States Because the pandemic puts stress on the supply chain.

At General Dynamics’ second-quarter earnings briefing on Wednesday, CEO Phebe Novakovic told investors that the company is tackling its own chip shortage in the IT hardware and software business.

Contextual: This is the first mention I’ve heard in a revenue call for a tight global chip supply since listed government tech companies began to make huge deals.

Novakovic told analysts that the lack of chips in certain products was one of the reasons why General Dynamics Mission Systems, which manufactures communications and cyber products primarily for defense and space customers, saw a “slight decline” in second-quarter revenue. He said it was one.

Mission Systems sales were down about 6.1% year-on-year to $ 1.1 billion, according to GD’s second-quarter regulatory filing.

Mission Systems is one of two units alongside the IT services business. Make up a technology segmentSales increased 3.2% from the second quarter of last year to $ 3.1 billion.

The second factor cited as part of the decline in mission systems was the sale of the satellite antenna business to the CPI, which closed in June last year.

Of course, General Dynamics isn’t the only company in a pinch of turmoil throughout the chip supply chain. As Novaković said, “we and others” are “and working hard to tackle the problem” to address the shortage.

She anticipates the unique problem that the mission systems business will get chips that need to be improved in the second half of the year. Both Novakovic and Chief Financial Officer Jason Aiken believe that the resolution will free the unit and realize this year’s measured profits.

“Assuming the business can overcome some of the supply chain problems they saw, at this point we are receiving a good signal that they will be possible in the second half of the year, so we have some modest organic You should see growth, the business was year-round, “said Aiken.

General Dynamics currently expects total revenues from the entire technology segment this year to be $ 13 billion, down about $ 200 million from the initial guidance in January. However, GD also raised its segment operating margin forecast to 9.8%, with an initial outlook of 9.5%.

According to the company’s 2020 annual report, last year’s revenue split in the technology segment was $ 7.9 billion in the GD information technology services business and $ 4.7 billion in mission systems.

Meanwhile, GDIT recorded a 9.9% revenue increase in the second quarter of this year to $ 2 billion as it began working on new contracts previously awarded.

Novakovic said GDIT is also waiting for protest decisions that exceed the potential contract value of $ 4.6 billion, including “two major awards that competitors disagree with,” and these decisions are successful. For example, he said the unit could be secured.

The protest is one of the two factors that GDIT is dealing with today, quoted by Novaković, one of which remains the overhang she spoke earlier.

“Two fundamental factors delay the awarding of contracts. One is the ever-growing customer decision-making cycle, and the other is the tendency of many in the IT industry to repeatedly protest. Is growing. It’s fast and often like a mantra, “Novakovich said. “It will make the perception of that income a little rugged.”

GDIT has a $ 34 billion proposal in the source selection phase and plans to submit an additional $ 20 billion bid by the end of this year.

Opportunities in the private sector fall into these categories, as many within that customer group were to grow under the Biden administration’s budget blueprint.

“Imagine they receive more money and the IT infrastructure is ubiquitous for all missions, and I think that’s an additional benefit and potential for us,” Novakovic said. I have.

“When it comes depends on the whole set of timing issues, but rest assured that in the future pipeline we’re looking at, there are some good private jobs out there.”

On a company-wide basis, GD raised its sales outlook this year by $ 200 million to $ 39.2 billion with an operating margin of 10.6%.

About the author

Ross Wilkers is a senior staff writer at Washington Technology. He can be contacted at rwilkers@washingtontechnology.com. Follow him on Twitter: @rosswilkers..Also connect with him LinkedIn..



https://washingtontechnology.com/articles/2021/07/28/general-dynamics-q2-earnings.aspx That’s not the only problem with general dynamics chip supply-Washington Technology

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