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2OO5
           Fiscal Year

                   Annual        Report




saic.com




                                                                  ™
                                FROM   SCIENCE   TO   SOLUTIONS
|1




SAIC DELIVERS

 REAL INNOVATION

              REAL INDEPENDENCE
                                                                                    In a world where all three are increasingly rare, SAIC deliv-



     REAL VALUE
                                                                                    ers the genuine article. The result: better solutions for our
                                                                                    customers.
                                                                                      Real innovation often occurs at the intersection of differ-
                                                                                    ent disciplines, such as information technology and biol-
                                                                                    ogy. At SAIC, we have a rich diversity of scientific, engineer-
                                                                                    ing, and IT experts who excel at cross-disciplinary problem
                                                                                    solving. Thanks to their creativity and innovation, we have
                                                                                    a well-deserved reputation for solving some of our custom-
                                                                                    ers’ most difficult and complex problems. And a reputation
                                                                                    for delivering genuinely significant – and useful – results.
                                                                                      True platform independence means we can choose the
                                                                                    best technologies and integration strategies to meet our
                                                                                    customers’ needs. We have access to a wealth of software,
                                                                                    hardware, and technology options. More importantly, we
                                                                                    have the experience and knowledge to help customers
                                                                                    make better choices on how to leverage new and existing
                                                                                    technologies and resolve technology concerns.
                                                                                      Real value is our promise to our customers. SAIC organi-
                                                                                    zations stay close to their customers, help them anticipate
                                                                                    new requirements in a changing world, and respond with
                                                                                    speed and agility. And our organizations create highly mo-
     T A B L E O F C O N T E N T S Message to Stockholders                     2
                                                                                    tivated employees who feel an ownership for the company
                                        Solutions for Government and
                                        Commercial Customers                    5
                                                                                    and its results.
                                         Systems Engineering and Integration    6
                                         Research and Development              10
                                                                                      These are just some of the reasons SAIC is a world-class
                                         Defense Transformation                14
                                         Logistics and Product Support         18
                                                                                    information technology company and a world-class science
                                         Intelligence Solutions                22
                                         Homeland Security                     26
                                                                                    and engineering company. But the most important reason:
                                         Commercial Services                   32
                                        Employee Ownership Culture             36
                                                                                    We deliver the best solutions for our customers.
                                        Team SAIC                              38
                                        Board of Directors                     40
2|                                                                                                                                                                                                                      |3
     SAIC   2005     ANNUAL       REPORT




                                                                                                                 execute and innovate, and perform and deliver.        many opportunities for growth in this arena.
                                                                                                                 We believe this is the best way to thank our cus-
                                                                                                                 tomers for their business and support.                Our changing business portfolio
                                                                                                                     Because of our customers’ confidence in SAIC,     Our business and technology portfolio must
                                                                                                                 our company revenues were $7.2 billion in Fiscal      reflect changing business realities. Shortly after
                                                                                                                 Year 2005, a 23% increase for the company as a        fiscal year end, we completed the sale of our
                                                                                                                 whole. Operating income rose 24%.                     Telcordia Technologies subsidiary to Providence
                                                                                                                     We set records in total contract awards and in    Equity Partners and Warburg Pincus. The sale
                                                                                                                 funded contract backlog. But the most dramatic        – which has a pre-tax value of approximately
                                                                                                                 move occurred in our cash flow from operating         $1.35 billion in cash – strengthens SAIC’s balance
                                                                                                                 activities, which jumped 61%. Cash flow is the        sheet and provides funds to pursue other
                                                                                                                 lifeblood of our company, generating free cash to     strategic initiatives. Since Telcordia has now been
                                                                                                                 make strategic acquisitions and investments to        classified as a discontinued operation, the SAIC
                                                                                                                 fuel our growth and create long-term value.           revenue, operating income, and cash flow results
                                                                                                                                                                       I cited earlier do not include Telcordia’s financial
                                                                                                                 Extraordinary growth in government business           results.
                                                                                                                 The key driver for our growth was outstanding             Telcordia’s market – the commercial telecom
                                                                                                                 performance in our government business, led by        space – has suffered a number of setbacks in
                                                                                                                 Duane Andrews, who was recently promoted to           recent years. I’m delighted we found two firms
                                                                                                                 Chief Operating Officer. Achieving this extraor-      that understand Telcordia’s market space and
                           CEO Ken Dahlberg (right) and COO Duane Andrews (left)
                                                                                                                 dinary growth meant capturing market share            strong potential; this improves Telcordia’s prob-
                                                                                                                 from determined competitors in an environment         ability of success within a consolidating industry.
                                                                                                                 where many government budgets were flat or                While the commercial telecom market
                                                                                                                 nearly so. Last year, you heard me say we were        struggled, SAIC’s telecom work for government
                                                                                                                 creating a more streamlined organization with         customers grew dramatically. Our government
                                                                                                                 sharper customer and market focus. These out-         telecom business now generates hundreds of
                                                                                                                 standing results speak for themselves.                millions of dollars in annual revenues. Our work
                                                                                                                    Four of the five operating groups turned in        involves advanced optical networks and satellite
                                                                                                                 stellar performances. Mark Hughes’ systems and        communications, management of converged net-
                                                                                                                 network group, Carl Albero’s naval engineering        works, and high-level security.

            MESSAGE                              STOCKHOLDERS
                                           TO                                                                    group, and George Singley’s transformation and            We remain committed to the commercial
                                                                                                                 logistics group grew 37%, 30%, and 21%, respec-       space and see many new opportunities emerg-
                                                                                                                 tively. Don Foley’s intelligence and research group   ing. For example, we are well positioned to help
SAIC delivered superb results in both technical          of their lives. Some of the most admirable are the      grew 32%, becoming the largest in the com-            the “super majors” in the oil industry transition
and financial performance this past year. I want         SAIC employees working in unstable regions of           pany. Don accepted a new position as our Chief        next-generation digital oil field technology from
to thank the two groups responsible for our suc-         the world, such as Iraq and Afghanistan, in order       Engineering & Technology Officer, and in FY06, his    successful pilots to full-scale deployment. Already,
cess – our customers and our employees.                  to protect our freedom.                                 organization divided into two new groups, now         we are helping Shell, ChevronTexaco, and BP
   Our customers face some of the most difficult             Most of all, we at SAIC are honored by our cus-     led by Trey Smith and Larry Prior.                    develop and deploy the technologies needed to
and mission-critical challenges in the United            tomers’ trust and confidence in our experience,            Larry Peck’s enterprise infrastructure group       make the next generation oilfield a reality.
States and even the world. At SAIC, it is our privi-     ability, and integrity. I could talk about our strong   also delivered market-beating growth and won
lege to help meet those challenges. The high-            ethics program, and the fact that SAIC has been         one of SAIC’s most important contracts – the U.S.     Discipline and entrepreneurship – the keys to
caliber work that our men and women perform              a member of the Defense Industry Initiative on          Army’s Guardian Installation Protection Program.      our future
every day makes real contributions to the security       Business Ethics and Conduct since its formation            Most of our growth came from the national          We are now working to build a stronger SAIC, bet-
and defense of our nation, and to cancer research,       in 1987. But the bottom line is how we execute          security arena, where we continued to find new        ter able to win and execute larger systems inte-
education, environmental cleanup, robotics, space        for our customers. SAIC executes approximately          opportunities and win market share.                   gration contracts. At the same time, we continue
exploration, and countless other areas.                  9,000 contracts annually, and last fiscal year we          Our work with civil agencies also showed solid     to strengthen the parts of our culture that made
   I am especially proud of the SAIC employees           had a 95% win rate on recompete contracts.              growth and strong potential. As those agencies        SAIC a multibillion-dollar engine of growth in
who have made service to country a central part              We earn our customers’ trust each time we           upgrade their IT infrastructures, we expect to see    professional services and smaller contracts.
4|                                                                                                                                                                                                                                                |5
                            SAIC           2005   ANNUAL            REPORT




                         To do so, our culture is embracing both disci-                 experiences. Our future success depends on it.
                     pline and entrepreneurship. The latter has always                         To do so, we strengthened initiatives to grow
                     been in great supply in SAIC. We introduced moreEarningsper Share leaders, improveNetIncome diversity, and
                                                                Diluted Earnings per Share                            Net Income
                                                                 Diluted Earnings per Share
                                                                 Diluted                                               Net Income
                                                                                        future                         workforce
                                                                                                                      Millions
                                                                                                                       Millions
                                                                                                                      Millions
                     of the former when we launched new strategic                       expand training opportunities. We also strength-
                                                                  $8$8                                                            2005 $409
                                                                                                                                   2005 $409
                                                                             2005 $2.18
                                                                   $8         2005 $2.18                             $2,000        2005 $409
                                                                                                                      $2,000
                                                                              2005 $2.18 our capabilities in pivotal jobs such as “pro-
                     campaigns in what, we believe, will be our most                    ened                          $2,000
                                                                                                                                  2004 $351
                                                                                                                                   2004 $351
                                                                             2004 $1.86
                                                                              2004 $1.86                                           2004 $351
                                                                              2004 $1.86
                     important growth areas. The experience and               2003 $1.28 manager” and “systems engineer.”$259
                                                                                        gram                                      2003 $259
                                                                                                                                   2003
                                                                             2003 $1.28                                            2003 $259
                                                                              2003 $1.28

                     insights of our Directors and top managers $6 were        Net gains from And we still believe our employee Netgains from
                                                                                                                                       ownership
                                                                                                                                    Net gains from
                                                                                                                                     Net gains from
                                                                                 Netgains from
                                                                                     gains from
                                                                    $6          Net
                                                                   $6                                                               investment activities
                                                                                                                                      investment activities
                                                                               investment activities
                                                                                 investment activities                               investment activities
                                                                                investment activities
                     crucial in creating these campaigns, which will           and sales ofofbusiness is one of the keys to motivate theof business
                                                                                        culture                                      and sales best
                                                                                                                                    and sales ofof business
                                                                                                                                      and sales business
                                                                                 and sales business
                                                                                and sales of business
                                                                                                                     $1,500
                                                                                                                      $1,500
                                                                                                                      $1,500        units and subsidiary
                                                                                                                                      units and subsidiary
                                                                               units and subsidiary
                                                                                 units and subsidiary                                units and subsidiary
                                                                                units and subsidiary
                     guide our efforts to capture future key contracts.         common stock brightest to perform at top levels forstock
                                                                                        and                                                     our
                                                                                                                                    common stock
                                                                                                                                     common stock
                                                                                                                                      common
                                                                               common stock
                                                                                 common stock


                         Our FY06 operating plan is tightly integrated                  customers. That’s why we continue to seek ways
                                                                  $4$4
                                                                   $4
                              * All years presented
                     with our**haveyears presented
                                 All years presented
                                  All
                                new strategic campaigns and our stra-                   to strengthen this important part of our heritage
                                      been restated
                                  have been restated
                                 have been restated
                                totoshow Telcordia
                                   show Telcordia
                                 to show Telcordia                                                                   $1,000
                                                                                                                      $1,000
                     tegic imperatives asas technology development,
                                Technologies, Inc. for                                  – and our future.             $1,000
                                  Technologies, Inc.
                                 Technologies, Inc. as
                                discontinued
                                  discontinued                    $2$2
                                 discontinued                      $2
                     acquisitions, and improvements to our informa-
                                operation
                                  operation
                                 operation

                     tion technology infrastructure.
                                                                                            $0
                                                                                             $0                                                                     $0
                                                                                                                                                                     $0
                                                                                             $0                                                                      $0
                                                                   ’01                                                       ’05                                              ’01                ’05
                                                                     ’01                                                       ’05                                              ’01                ’05
                     Employee diversity and empowerment             ’01                                                       ’05                                              ’01                ’05

                     Going forward, we must hire, retain and grow the                                                  KEN DAHLBERG
                     best and brightest from diverse backgrounds and                                                   CEO, President, and Chairman of the Board



                       Revenues                                                        Operating Income                                                        Stockholders’ Equity
                        Revenues                                                        Operating Income                                                        Stockholders’ Equity
                       Revenues                                                        Operating Income                                                        Stockholders’ Equity
                       Millions                                                        Millions                                                                Millions
                        Millions                                                        Millions                                                                Millions
                       Millions                                                        Millions                                                                Millions
                                                                                                                                                                                                                our group m anagement tea m:
                                                                                       $500
                                                                                        $500
                                                                                        $500
                       $7,000 2005 $7,187                                                              2005    $488                                                                   2005    $2,351
                        $7,000 2005 $7,187                                                              2005    $488                                                                   2005    $2,351
                        $7,000 2005 $7,187                                                              2005    $488                                                                   2005    $2,351
                                   2004 $5,833                                                         2004    $395                                                                   2004    $2,203
                                    2004 $5,833                                                         2004    $395                                                                   2004    $2,203
                                    2004 $5,833                                                         2004    $395                                                                   2004    $2,203
                                                                                                                                                               $3,000
                                                                                                                                                                $3,000
                                   2003 $4,835                                                         2003    $311                                                                   2003    $2,020
                                    2003 $4,835                                                         2003    $311                                                                   2003    $2,020
                                                                                                                                                                $3,000
                                    2003 $4,835                                                         2003    $311                                                                   2003    $2,020
                       $6,000
                        $6,000
                        $6,000
                                                                                                                                                                                                                      Group Presidents from left to right:
                                                                                       $400
                                                                                        $400
                                                                                        $400

                       $5,000
                        $5,000                                                                                                                                                                                  George Singley III, Trey Smith III, Mark Hughes III,
                        $5,000
                                                                                       $300
                                                                                        $300
                                                                                        $300                                                                   $2,000
                                                                                                                                                                $2,000                                           Larry Peck, Carl Albero, and Lawrence Prior III
                                                                                                                                                                $2,000
                       $4,000
                        $4,000
                        $4,000

                       $3,000
                        $3,000
                        $3,000                                                         $200
                                                                                        $200
                                                                                        $200

                                                                                                                                                               $1,000
                                                                                                                                                                $1,000
                       $2,000                                                                                                                                   $1,000
                        $2,000
                        $2,000
                                                                                       $100
                                                                                        $100
                                                                                        $100
                       $1,000
                        $1,000
                        $1,000

                            $0                                                             $0
                             $0                                                             $0                                                                      $0
                                                                                                                                                                     $0
                            $0                                                              $0                                                                       $0
                                                     ’05                                                                    ’05                                                                  ’05
                                                       ’05                                                                    ’05                                                                  ’05
                                   ’01                                                                ’01                                                                     ’01
                                     ’01                                                                ’01                                                                     ’01
                                                      ’05                                                                    ’05                                                                  ’05
                                    ’01                                                                ’01                                                                     ’01


                                                  Diluted Earnings per Share
                                                       Diluted Earnings per Share                                       Net Income
                                                                                                                             Net Income
                                                                                                                        Millions
                                                                                                                               Millions

                                                   $8        $8                                                                            2005 2005 $409
                                                                                                                                                 $409
                                                                   2005 2005 $2.18
                                                                         $2.18                                          $2,000
                                                                                                                             $2,000
                                                                                                                                           2004 2004 $351
                                                                                                                                                 $351
                                                                   2004 2004 $1.86
                                                                         $1.86
                                      All years                                                                                            2003 2003 $259
                                                                                                                                                 $259
                                                                   2003 2003 $1.28
                                                                         $1.28
                               presented have
                                                                                                                                                Net gainsNet gains from
                                                                                                                                                          from
                                                                        Net gainsNet gains from
                                                                                  from


                                                                                                                                                                                                         SOLUTIONS                        GOVERNMENT
                                                   $6        $6
                                                                                                                                                                                                                                   for
                                been restated                                                                                                   investment activities activities
                                                                                                                                                         investment
                                                                        investment activities activities
                                                                                 investment
                                                                                                                                                and salesand sales of business
                                                                                                                                                          of business
                                                                        and salesand sales of business
                                                                                  of business
                                      to show                                                                           $1,500
                                                                                                                             $1,500             units andunits and subsidiary
                                                                                                                                                          subsidiary
                                                                        units andunits and subsidiary
                                                                                  subsidiary
                                                                                                                                                common common stock
                                                                                                                                                         stock
                                                                        common common stock
                                                                                 stock
                                     Telcordia

                                                                                                                                                                                                               COMMERCIAL CUSTOMERS
                                                                                                                                                                                                         and
                                                   $4        $4
                                 Technologies,
* have been restated restated
         * have been
  All years presented
            All years presented
                                      Inc. as a
  to show TelcordiaTelcordia
            to show
                                                                                                                        $1,000
                                                                                                                             $1,000
  Technologies, Inc. as Inc. as discontinued
            Technologies,
  discontinued
            discontinued                           $2        $2
                                    operation
  operation operation




                                                   $0    $0                                                               $0        $0
                                                         ’01      ’01                       ’05       ’05                           ’01   ’01                       ’05       ’05
6|                                                                                                                                                                                 |7
     SAIC   2005    ANNUAL      REPORT




SYSTEMS ENGINEERING                                 INTEGRATION
                                              AND




How much IT security is enough?                                                                                                        architecture and data network linking 22
                                                                                                                                       agencies encompassing 180,000 employees.
How much more value could you                                                                                                          We did so on an incredibly accelerated
                                                                                                                                       schedule and won praise from then DHS CIO
extract from your data systems                                                                                                         Steve Cooper for our work.
                                                                                                                                           We are currently developing the ground-
if they were compatible? How                                                                                                           breaking architecture for a networked
                                                                                                                                       “system of systems” for the U.S. Army’s Future
do you know if it’s the right time                                                                                                     Combat Systems program. The Boeing-SAIC
                                                                                                                                       team is the Lead Systems Integrator for
to innovate? How can you build                                                                                                         this program. This enormously complex
                                                                                                                                       undertaking requires a system that is open
more stability and reliability into                                                                                                    and flexible to accommodate future needs
                                                                                                                                       while simultaneously employing the state
an already complex and unwieldy                                                                                                        of the art today. Since 2003, Boeing and
                                                                                                                                       SAIC have developed a common operating
infrastructure when operational                                                                                                        environment, launched an integration lab,
                                                                                                                                       and delivered a virtual framework and
requirements and technologies                                                                                                          integrated simulations – all while keeping
                                                                                                                                       the program on cost and on schedule.
keep changing? At SAIC, we help                                                                                                            The Joint Project Manager Guardian
                                                                                                                                       chose SAIC as Lead Systems Integrator for the
customers answer tough questions                                                                                                       Installation Protection Program that started
                                                                                                                                       last fiscal year. To help protect DoD installa-
like these every day.                                                                                                                  tions, we are integrating chemical, biological,
                                                                                                                                       radiological, and nuclear protection systems
Even more important, we deliver proven                                                                                                 at up to 200 DoD installations worldwide.
performance time and again on some of                                                                                                  Installation protection is provided through
the U.S. Government’s most complex and                                                                                                 an integrated family of systems focused on
important systems.                                                                                                                     continuity of the military mission.
   That’s why SAIC consistently ranks among                                                                                                But the best evidence for our expertise
the top federal systems integrators year                                                                                               and commitment in integrating major
after year. It’s also why customers choose                                                                                             systems comes from our longest-term
SAIC for some of the most difficult systems                                                                                            customers. The Royal Saudi Naval Forces has
integration tasks imaginable.                                                                                                          worked with SAIC for more than a quarter
   After the Department of Homeland                                                                                                    century. As part of our support to the Saudi
Security opened its doors in 2003, we                                                                                                  Navy, we integrated the first operational
integrated its first-ever enterprise                                                                                                   command and control system in the Persian
                                                                  SAIC Security Operations Centers, such as this one (above),
                                                                  deliver threat intelligence and managed security services to
                                                                  government and commercial clients worldwide. Our high cus-
                                                                  tomer retention rate testifies to the strength of this capability.
8|                                                                                                                                                                                                                   |9
                   SAIC   2005     ANNUAL         REPORT




                      FORTUNE magazine has ranked SAIC among America’s “Most                                                      Gulf region. Years later, the Gulf War began        be repeatable and a higher level of customer
                                                                                                                                  and our system dramatically and successfully        satisfaction.
                      Admired Computer and Data Service Companies” for three                                                      scaled up and expanded its operations. When             These were also some of the scoring
                      consecutive years.                                                                                          Riyadh came under fire, SAIC personnel chose        criteria when results were announced for
                                                                                                                                  to stay in country and support the system’s         the U.S. Government’s Top 5 Quality Software
                                                                                                                                  operations. After hostilities ceased, Saudi         Projects. Simulation software developed by
                                                                                                                                  authorities were lavish in their praise.            SAIC for the U.S. Army was named a winner
                                                                                                                                      Our support continues today with major          – for the second year in a row.
                                                                                                                                  new contracts to upgrade this large-scale C4I           That software was developed by our
                                                                                                                                  system – and its communications networks            SAIC Orlando organization, which has been
                                                                                                                                  – at the main naval headquarters in Riyadh,         externally assessed at the highest level of
                                                                                                                                  at Western Fleet headquarters on the Red            software and systems engineering maturity,
integration




                                                                                                                                  Sea, and at Eastern Fleet headquarters on the       CMMI® Maturity Level 5, as defined by the
                                                                                                                                  Persian Gulf.                                       Software Engineering Institute of Carnegie
                                                                                                                                                                                      Mellon University.
                                                                                                                                  Enterprise services integration. Large                  To achieve their success, our Orlando staff
                                                                                                                                  enterprises face increasingly tough                 combined high-quality CMMI® processes
                                                                                                                                  challenges to integrate and share massive           with fast, flexible techniques derived from
                                                                                                                                  amounts of data from far flung and disparate        extreme programming (XP), and spiral
                                                                                                                                  databases and legacy systems.                       development methods. They also facilitated
                                                                                                                                     One of the world’s largest enterprises           collaboration across a government-industry
 and




                                                                                                                                  – the U.S. Department of Defense – has              Integrated Product Team with a Web-based,
                                                                                                                                  enlisted SAIC’s help.                               collaborative, integrated development
engineering




                                                                                                                                     A new SAIC laboratory evaluates existing         environment. This winning combination is
                                                                                                                                  and emerging Web service technologies and           now recommended by CrossTalk, the Journal
                                                                                                                                  service-oriented architectures to determine         of Defense Software Engineering, in its tips for
                                                                                                                                  whether they have the “industrial strength”         success.
                                                                                                                                  to become enterprisewide DoD solutions.                 All these elements were key to creating
                                                                                                                                     As impressive as this is, our new Enter-         “a scalable, flexible, extensible, composable
                                                                                                                                  prise Services Integration & Interoperability       architecture that is technically the best
                                                                                                                                  Laboratory is more than a technology proving        simulation architecture I have seen in several
                                                                                                                                  ground. It also provides a wide range of tools      years of working under the hood in military
systems




                                                                                                                                  to help DoD application developers build            simulations,” said Army Project Manager Lt.
                                                                                                                                  “new” capabilities from legacy systems and          Col. John Surdu, who was quoted in CrossTalk.
                                                                                                                                  data. Tools ranging from Web-service adap-              SAIC has organizations dedicated to
                                                                                                                                  tors and inference engines to ontological and       this high level of software and systems
                                                                                                                                  semantic models help developers expose and          engineering quality across the company.
                                                                                                                                  extract data and the business rules embed-          Six SAIC organizations – encompassing
                                                                                                                                  ded within legacy systems. Other tools test         6,000 professionals – are rated at CMMI®
                                                                                                                                  for interoperability, deployability, scalability,   Maturity Level 5. Ten SAIC organizations have
                                                                                                                                  and maintainability.                                achieved Level 3 maturity and eight have
                                                                                                                                                                                      achieved Level 2 maturity. Our staff also help
                                                                                                                                  Software development. For customers, the            government and commercial organizations
                                                                                                                                  benefits of higher software maturity ratings        learn CMMI® methodology and they appraise
                                                                                                                                  are clear: greater assurance that complex           other organizations for CMMI® compliance.
                      (Above) SAIC’s Integrated Services Management Centers in North America, Europe and Asia help en-
                                                                                                                                  software programs will be on time, within           Year after year, our staff have shown their
                      terprises achieve both short- and long-term strategic goals regardless of their size. Operating under
                                                                                                                                  budget, and perform as expected. Add to that        commitment to bring the benefits of high
                      industry standard certifications for our signature IT services, we support global clients in such diverse
                                                                                                                                  greater assurance that project successes will       software maturity ratings to our customers.
                      industries as: healthcare, energy, utilities, academia, entertainment, and telecommunications.
10 |                                                                                                                                                             | 11
       SAIC   2005   ANNUAL   REPORT




RESEAR CH                              DE VELOPMENT
                              AND                     (Below left) Understanding how cancer forms from normal cells requires knowledge about the molecular path-
                                                      ways in individual cells while they are in their normal environment. At the National Cancer Institute’s Confocal
                                                      Microscopy Facility, SAIC researchers use living 3D tissue culture models to understand the molecular mechanisms
                                                      that govern cells’ organization, their movement, how they invade within the body and mutate into cancer cells.




                                                      As one of the largest science and                            with the National Institute of Allergy and
                                                                                                                   Infectious Diseases, NCI, and the U.S. Army to
                                                      technology organizations in the                              produce and test a promising recombinant
                                                                                                                   protective antigen vaccine. We also help de-
                                                      United States, SAIC conducts                                 velop vaccines to combat other devastating
                                                                                                                   diseases such as malaria and HIV.
                                                      leading-edge research and devel-                                 To accelerate translational cancer re-
                                                                                                                   search, the NCI’s new cancer Biomedical
                                                      opment from outer space to the                               Informatics Grid (caBIG) is helping with cross-
                                                                                                                   disciplinary sharing of research between
                                                      ocean depths. Our scientists and                             more than 600 cancer researchers from over
                                                                                                                   50 different cancer centers. SAIC is develop-
                                                      engineers move the state of the                              ing important grid-based middleware, appli-
                                                                                                                   cations, and security for this groundbreaking
                                                      art forward in cancer and AIDS                               initiative.

                                                      research, advanced signal process-                           Space technology. For decades, SAIC has con-
                                                                                                                   ducted and supported leading-edge research
                                                      ing, and modeling and simulation.                            for space exploration and global climate
                                                                                                                   change. For the U.S. Geological Survey, we
                                                                                                                   operate the EROS Data Center – the world’s
                                                      Biopharmaceutical and medical research.
                                                                                                                   largest collection of remotely sensed data for
                                                      For the National Cancer Institute (NCI), we
                                                                                                                   customers studying a variety of environmen-
                                                      operate NCI-Frederick, one of the world’s
                                                                                                                   tal issues such as land use and global change.
                                                      premier cancer and AIDS research facilities.
                                                                                                                   We develop and manage multiple database
                                                      There we support a wide range of research
                                                                                                                   architectures that are critical to the center’s
                                                      areas, including development of nanotech-
                                                                                                                   mission to make dynamic data products
                                                      nology applications for the diagnosis, preven-
                                                                                                                   readily accessible to customers worldwide.
                                                      tion, and treatment of cancer.
                                                                                                                       We also play a leading role in NASA’s hu-
                                                          We work with NCI researchers to develop
                                                                                                                   man spaceflight program, providing safety,
                                                      nanoscale devices (less than 100 nanometers
                                                                                                                   reliability, and quality assurance for the In-
                                                      in size) that can deliver cancer therapeutic
                                                                                                                   ternational Space Station, and helping NASA
                                                      agents and anticancer vaccines at the cellular
                                                                                                                   return the Space Shuttle to flight status.
                                                      level. Smaller than a living cell, these tiny
                                                                                                                       When the Cassini mission’s Huygens
                                                      drug delivery devices will likely be able to
                                                                                                                   probe descended through the atmosphere
                                                      target only malignant cells, sparing healthy
                                                                                                                   of Titan, Saturn’s largest moon, and began
                                                      cells and reducing the side effects of today’s
                                                                                                                   transmitting data and striking images of its
                                                      cancer treatments.
                                                                                                                   frozen surface, SAIC engineers and scientists
                                                          To help expedite development of a next-
                                                                                                                   could take pride in the historic event. We
                                                      generation anthrax vaccine, we are working
12 |                                                                                                                                                                                                                               | 13
                     SAIC   2005    ANNUAL      REPORT




                       have supported this international research       Modeling and simulation. SAIC pioneered
                       mission since 1988. Among other things, we       state-of-the-art technologies including dis-
                                                                                                                         (Right) To better understand oceanic factors in global climate
                       worked on the environmental and launch           tributed simulation for training and distrib-
                                                                                                                         change, we help NASA process, display, and analyze ocean-color
                       safety analyses required because of the          uted test and evaluation. Today, our expertise
                                                                                                                         data gathered by satellites. Subtle changes in ocean color signify
                       radioisotope-fueled devices that provide         ranges from traditional areas, such as train-
                                                                                                                         various types and quantities of marine phytoplankton (micro-
                       electrical power and heat for Cassini.           ing and analysis simulation, to emerging
                                                                                                                         scopic marine plants), the knowledge of which has both scientific
                                                                        areas, such as simulation-based acquisition.
                                                                                                                         and practical applications.
                       Advanced signal processing. SAIC technolo-           Currently, we lead the development of
                       gists work on the frontiers of advanced signal   DoD’s architecture and middleware for seam-
                       and image processing. Over the years, we         lessly integrating live-virtual-constructive
                       pioneered breakthroughs in signal detection      simulation for experimentation, training,
                       and direction finding to protect submarines,     test and evaluation, and acquisition. In addi-
                       and automatically analyze synthetic aperture     tion, we are the leaders in technology devel-
                       radar images. Our engineers even devel-          opment for entity-based simulation, simula-
                       oped a new field of statistical detection and    tion interconnection, and next-generation
                       estimation theory, contributing to adaptive      entity-based Computer Generated Forces.
DEVELOPMENT




                       Wiener filter theory and its application to
                       radar and communications.                        Advanced robotics. With the military seeking
                           We have been recognized for advancing        to integrate unmanned systems into future
                       the state of the art in adaptive processing      forces, the DARPA Grand Challenge races pro-
                       algorithms that use multiple degrees of          vide a demanding environment to develop
                       freedom to detect weak signals in complex        and test new autonomous ground vehicles.
                       environments. For example, we work on the            During the 2004 race, the Sandstorm
                       leading edge of space-time adaptive process-     robotic vehicle, developed by Carnegie Mellon
                       ing to detect weak radar echoes from ground      University and SAIC, traveled much farther
 and




                       targets in the presence of large radar noise     than its competitors – successfully maneu-
                       (motion-induced spread-Doppler clutter).         vering across 12 kilometers of desert terrain
RESEARCH




                       Our work benefits the next generation of         at an average speed of 36 kilometers per hour
                       airborne surveillance radar systems.             and a top speed of 56 km/hour.
                           A leader in underwater signal processing         The mapping and route planning soft-
                       for three decades, SAIC provides critical        ware we developed for Sandstorm has
                       research and analysis to help the U.S. Navy      provided valuable insights that could be used
                       better detect hostile submarines and better      for geospatial intelligence requirements for
                       protect friendly submarines. With the rise in    future military robotic systems.
                       regional conflicts and asymmetrical threats,
                       the emphasis has shifted from open-ocean         Other innovative solutions. From advanced
                       detection to shallow water near coastlines.      radar systems to nonimaging optics,
                       In these waters, acoustic interference           our technology solutions are viewed as
                       generated by surface ships and complex           important tools for national security,
                       bottom interacting acoustic propagation          homeland defense, and the global war on
                       pose new challenges. Our new algorithms          terrorism.
                       enable towed sonar arrays to better detect          SAIC developed an advanced system that
                       and track ships even as the sub towing the       uses commercial HDTV broadcast signals
                       sonar array maneuvers. We are also exploring     to detect and track airborne and ground
                       new acoustic signal processing algorithms        moving vehicles. Currently deployed as a
                       and advanced underwater acoustic                 pilot program, the system is being evaluated     (Above) Micro satellites in low earth orbit over a combat zone could provide better reconnaissance for future tactical opera-
                       communications using off-board sensors and       as a potential “gap-filler” for airspace and     tions. For the Air Force Research Laboratory’s experimental micro satellite program, we are developing a high-resolution
                       unmanned vehicles.                               maritime surveillance.                           earth-observing system that includes a telescope and focal planes covering one panchromatic and three visible bands.
14 |                                                                                                                                                         | 15
       SAIC   2005    ANNUAL      REPORT                                                                                           SAIC 2005 ANNUAL REPORT




DEFENSE TR ANSFORM ATION                        Providing a full range of more realistic and effective training
                                                for Future Combat Systems, our OneSAF system is integrated
                                                with the Common Architecture Desktop/Embedded Trainer
                                                crew station (below) and a soldier wearing a virtual simulator
                                                called DAGGERS during a simulated tactical exercise (right).




By putting new strategic thinking                                                                                 able success and has moved from concept
                                                                                                                  and design phase to systems design, develop-
into action, SAIC helps the U.S. mil-                                                                             ment, and demonstration. Today, more than
                                                                                                                  two years into execution, the program has
itary and its allies transform the                                                                                passed numerous reviews and is on cost and
                                                                                                                  on schedule.
way they will fight future wars.                                                                                      Capitalizing on these successes, the Army
                                                                                                                  restructured the program to accelerate pro-
To help ensure our soldiers are                                                                                   curement of FCS capabilities. This restructure
                                                                                                                  includes a means for spiraling FCS capabili-
better equipped, protected, and                                                                                   ties into the current force as early as 2008.
                                                                                                                      Getting warfighters the right information
trained, we assist our customers in                                                                               at the right place and time requires a world-
                                                                                                                  wide network with enormous bandwidth.
developing new technologies for                                                                                   The new Global Information Grid envisioned
                                                                                                                  by DoD benefits from important SAIC con-
the future, and spiraling advanced                                                                                tributions throughout its architecture. For
                                                                                                                  example, SAIC helps lead integration of the
technologies into the current force.                                                                              network’s cornerstone – the Global Informa-
                                                                                                                  tion Grid-Bandwidth Expansion (GIG-BE)
                                                                                                                  program. GIG-BE is bringing an optical mesh
Network-centric operations. As a leader
                                                                                                                  network with 10-gigabyte-per-second con-
in the emerging area of network-centric
                                                                                                                  nectivity to about 100 DoD bases, posts and
operations, we are helping the military
                                                                                                                  stations. Moreover, GIG-BE achieved initial
achieve a powerful competitive edge through
                                                                                                                  operating capability in only 20 months.
advanced networked capabilities, shared situ-
                                                                                                                      To exploit the bandwidth capabilities pro-
ational awareness, improved collaborative
                                                                                                                  vided by GIG-BE, SAIC is supporting the DoD
planning, and enhanced speed and agility.
                                                                                                                  Net-Centric Enterprise Service (NCES) initia-
    Our work benefits transformational deci-
                                                                                                                  tive. NCES will provide the software services
sions at the highest levels of the Defense
                                                                                                                  framework to enable information sharing
Department and what may be the most
                                                                                                                  and collaboration by future command and
ambitious and far-reaching program for net-
                                                                                                                  control, business, and intelligence systems.
work-centric operations in the U.S. military
                                                                                                                  SAIC’s team is providing systems architecture,
services – the Army Future Combat Systems
                                                                                                                  technical integration, and technology deploy-
(FCS) program. As the Lead Systems Integra-
                                                                                                                  ment support to DISA as the agency pilots
tor for FCS, the Boeing-SAIC team is working
                                                                                                                  capabilities to Defense Computer Centers.
to speed delivery of crucial network-centric
                                                                                                                      And the lead joint military command and
capabilities to the current force.
                                                                                                                  control system that will operate over the GIG
    The FCS program has met with remark-
16 |                                                                                                                                                                                                                               | 17
                        SAIC   2005    ANNUAL       REPORT




                                                                                                                             “SAIC’s competitive strategy of knowing their customers, anticipating their needs, and
                          (the Global Command and Control System-            Simulation software developed by SAIC prom-
                          Joint) was also previously integrated by SAIC.     ises to be the new “gold standard” in both
                                                                                                                             suggesting innovative solutions has made them one of the most trusted and influential
                             All of this gives SAIC absolutely unmatched     areas: training and software design. Designed
                                                                                                                             high-level systems integrator’s in the C4ISR community.”
                          expertise in command and control and net-          for the U.S. Army, this OneSAF simulation
                          work-centric technologies.                         software has been chosen as the simulation      2004 Frost & Sullivan Competitive Strategy Leadership Award presented to SAIC
                                                                             engine for the Army Future Combat Systems,
                          New operational concepts for new threats.          named one of the Top U.S. Government
                          Transformation requires continuous in-             Software Projects, and adapted by the Marine
                          novation. As a pioneer in the Revolution in        Corps for use in their Combined Arms Staff
                          Military Affairs, SAIC has been instrumental in    Trainer.
                          developing much of the conceptual founda-             OneSAF’s flexible architecture can meet
                          tion for DoD’s approach to transformation. For     the full spectrum of simulation needs, from
                          example, we helped develop, test, and refine       developing new operational concepts and
                          such capstone concepts as dominant maneu-          engineering research to mission planning and
                          ver and long-range precision strike.               after-action training reviews.
                              SAIC is at the heart of defense transforma-
TRANSFORMATION




                          tion at U.S. Joint Forces Command, the “trans-     Technology transformation. We develop
                          formation laboratory” for the U.S. military, and   leading-edge technologies to solve complex
                          at NATO’s Allied Command Transformation.           problems facing our forces. For example,
                          Our analysts develop future warfighting con-       we are exploring solutions to better pro-
                          cepts, such as Effects Based Operations and        tect combat vehicles from rocket-propelled
                          Operational Net Assessments, which require         grenades and other threats. Working with the
                          a rich systemic understanding of opponents         Army Research Laboratory, we successfully
                          and operational environments. Many of these        demonstrated an electromagnetic (EM) armor
                          concepts are being implemented today. For          system to protect a combat vehicle’s flank.
                          example, our support to joint urban opera-            EM armor and electric weapons require
                          tions includes concept modeling and analysis       large amounts of pulsed electric power. At
                          with the Joint Semi-Automated Forces simula-       the same time, future combat vehicles must
DEFENSE




                          tion system, resulting in better understanding     be lighter weight, more mobile, and more
                          of urban operations in Iraq and Afghanistan.       fuel-efficient. Hybrid electric power systems
                              For the Joint National Training Capability,    promise to meet all these requirements once
                          SAIC is helping develop a persistent, global       major technical challenges are overcome. We
                          network of live, virtual, and constructive         are working to overcome these technical chal-
                          simulation components that serves as a             lenges at a systems integration laboratory we
                          seamless training environment to joint and         helped build and operate for the Army.
                          service forces. This key transformation initia-       Lighter, more efficient power is also the
                          tive and others are supported from SAIC’s new      goal for radios, computers, and hand-held GPS
                          facility in Suffolk, Virginia, where the Joint     units, and for our DARPA-funded research in
                          System of Systems Collaborative Environment        nanocomposite photovoltaic technology.
                          Laboratory serves as a portal to the network.
                          Our analysts also identify and develop new         Base realignment. Our wide-ranging environ-
                          intelligence and C4ISR technologies for joint      mental services support the transformation
                          forces.                                            and realignment of DoD missions, facilities,
                                                                             and systems. We support property remedia-
                          Training for the future. Transformational          tion through full-service environmental reme-   (Above) Soldiers in combat could soon have important new advantages thanks to two unique SAIC concepts. By riding this
                          systems of systems rely on well-trained forces     diation contracts with the Army. And we pro-    all-terrain vehicle to a combat zone, a soldier would be able to flip a switch, convert the vehicle to robot mode, and tele-
                          and well-designed software, both of which          vide environmental assessment, analysis, and    operate the vehicle as it conducts unmanned missions in dangerous areas. In order to engage quickly and accurately during
                          need to perform successfully when called up.       compliance support to the Air Force and Navy.   close combat at night, the night vision goggles import an aligned view from a separate infrared sight on the weapon.
18 |                                                                                                                                                                                 | 19
       SAIC   2005   ANNUAL   REPORT                                                                                                                    SAIC 2005 ANNUAL REPORT




LOGISTICS                              PRODUCT SUPPORT
                              AND                                                          (Below) Our Radio Frequency Identification (RFID) solutions help streamline the movement
                                                                                           of materials by improving asset visibility, tracking, and accuracy. At the Fleet and Industrial
                                                                                           Supply Center Norfolk, SAIC implemented one of DoD’s first fully integrated passive RFID in-
                                                                                           stallations. The system provides real-time visibility for more than 150,000 tagged pieces of
                                                                                           material flowing through the terminal annually.




During Operation Iraqi Freedom,          New ways to “sense and respond” to troop
                                         needs. As light-armored vehicles, troop car-
U.S. warfighters had the technol-        riers, and combat-equipped Humvees raced
                                         toward Baghdad, they sometimes outran
ogy edge but their rapid advances        fuel supplies. We are working to make fuel
                                         shortages a thing of the past by developing
occasionally outran logistics            new concepts and solutions in “sense and
                                         respond” logistics.
support. To keep up with “light-             For the U.S. Army Logistics Transformation
                                         Agency, we are implementing sensors on
ning-fast” military operations,          5,000-gallon fuel tankers and the 10,000-gal-
                                         lon fuel storage “bladders” and integrating
logisticians need some of the same       those sensors into a prototype “sense and
                                         respond” system. A key feature of the system
technology advances that SAIC has        is our adaptive agents (actually sophisti-
                                         cated software codes) that review sensor
delivered to the warfighters:            data, compare it with data from command
                                         and control systems and other sources, and
better intelligence sensors, com-        decide what supplies should be ordered and
                                         when. In other words, we’re designing the
munications networks, and ana-           system to receive near real-time information
                                         on where the battle is going (from command
lytics. At the same time, military       and control system data), and respond to
                                         supply needs “on the fly” as battlefield condi-
logisticians need the best supply        tions change. Today’s system responds to fuel
                                         needs, but tomorrow’s system potentially
chain solutions from the commer-         could better meet the ammunition needs of
                                         troops in the heat of battle.
cial sector: demand forecasting,
                                         In the field, not the depot. While our “sense
total asset visibility, and just-in-     and respond” system is still experimental,
                                         our intelligent agent technology has proven
time inventory. At SAIC, we are de-      its success on major Integrated Prime Vendor
                                         programs for the Defense Logistics Agency
livering on all of these and more,       (DLA). We use this technology to supply more
                                         than 127,000 items – ranging from bench
as part of our commitment to give        stock to aircraft subassemblies and engine
                                         and landing gear components – to the Air
logisticians the technical edge.         Force depots and mechanics that maintain
saic annual reports 2005
saic annual reports 2005
saic annual reports 2005
saic annual reports 2005
saic annual reports 2005
saic annual reports 2005
saic annual reports 2005
saic annual reports 2005
saic annual reports 2005
saic annual reports 2005
saic annual reports 2005

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saic annual reports 2005

  • 1. 2OO5 Fiscal Year Annual Report saic.com ™ FROM SCIENCE TO SOLUTIONS
  • 2. |1 SAIC DELIVERS REAL INNOVATION REAL INDEPENDENCE In a world where all three are increasingly rare, SAIC deliv- REAL VALUE ers the genuine article. The result: better solutions for our customers. Real innovation often occurs at the intersection of differ- ent disciplines, such as information technology and biol- ogy. At SAIC, we have a rich diversity of scientific, engineer- ing, and IT experts who excel at cross-disciplinary problem solving. Thanks to their creativity and innovation, we have a well-deserved reputation for solving some of our custom- ers’ most difficult and complex problems. And a reputation for delivering genuinely significant – and useful – results. True platform independence means we can choose the best technologies and integration strategies to meet our customers’ needs. We have access to a wealth of software, hardware, and technology options. More importantly, we have the experience and knowledge to help customers make better choices on how to leverage new and existing technologies and resolve technology concerns. Real value is our promise to our customers. SAIC organi- zations stay close to their customers, help them anticipate new requirements in a changing world, and respond with speed and agility. And our organizations create highly mo- T A B L E O F C O N T E N T S Message to Stockholders 2 tivated employees who feel an ownership for the company Solutions for Government and Commercial Customers 5 and its results. Systems Engineering and Integration 6 Research and Development 10 These are just some of the reasons SAIC is a world-class Defense Transformation 14 Logistics and Product Support 18 information technology company and a world-class science Intelligence Solutions 22 Homeland Security 26 and engineering company. But the most important reason: Commercial Services 32 Employee Ownership Culture 36 We deliver the best solutions for our customers. Team SAIC 38 Board of Directors 40
  • 3. 2| |3 SAIC 2005 ANNUAL REPORT execute and innovate, and perform and deliver. many opportunities for growth in this arena. We believe this is the best way to thank our cus- tomers for their business and support. Our changing business portfolio Because of our customers’ confidence in SAIC, Our business and technology portfolio must our company revenues were $7.2 billion in Fiscal reflect changing business realities. Shortly after Year 2005, a 23% increase for the company as a fiscal year end, we completed the sale of our whole. Operating income rose 24%. Telcordia Technologies subsidiary to Providence We set records in total contract awards and in Equity Partners and Warburg Pincus. The sale funded contract backlog. But the most dramatic – which has a pre-tax value of approximately move occurred in our cash flow from operating $1.35 billion in cash – strengthens SAIC’s balance activities, which jumped 61%. Cash flow is the sheet and provides funds to pursue other lifeblood of our company, generating free cash to strategic initiatives. Since Telcordia has now been make strategic acquisitions and investments to classified as a discontinued operation, the SAIC fuel our growth and create long-term value. revenue, operating income, and cash flow results I cited earlier do not include Telcordia’s financial Extraordinary growth in government business results. The key driver for our growth was outstanding Telcordia’s market – the commercial telecom performance in our government business, led by space – has suffered a number of setbacks in Duane Andrews, who was recently promoted to recent years. I’m delighted we found two firms Chief Operating Officer. Achieving this extraor- that understand Telcordia’s market space and CEO Ken Dahlberg (right) and COO Duane Andrews (left) dinary growth meant capturing market share strong potential; this improves Telcordia’s prob- from determined competitors in an environment ability of success within a consolidating industry. where many government budgets were flat or While the commercial telecom market nearly so. Last year, you heard me say we were struggled, SAIC’s telecom work for government creating a more streamlined organization with customers grew dramatically. Our government sharper customer and market focus. These out- telecom business now generates hundreds of standing results speak for themselves. millions of dollars in annual revenues. Our work Four of the five operating groups turned in involves advanced optical networks and satellite stellar performances. Mark Hughes’ systems and communications, management of converged net- network group, Carl Albero’s naval engineering works, and high-level security. MESSAGE STOCKHOLDERS TO group, and George Singley’s transformation and We remain committed to the commercial logistics group grew 37%, 30%, and 21%, respec- space and see many new opportunities emerg- tively. Don Foley’s intelligence and research group ing. For example, we are well positioned to help SAIC delivered superb results in both technical of their lives. Some of the most admirable are the grew 32%, becoming the largest in the com- the “super majors” in the oil industry transition and financial performance this past year. I want SAIC employees working in unstable regions of pany. Don accepted a new position as our Chief next-generation digital oil field technology from to thank the two groups responsible for our suc- the world, such as Iraq and Afghanistan, in order Engineering & Technology Officer, and in FY06, his successful pilots to full-scale deployment. Already, cess – our customers and our employees. to protect our freedom. organization divided into two new groups, now we are helping Shell, ChevronTexaco, and BP Our customers face some of the most difficult Most of all, we at SAIC are honored by our cus- led by Trey Smith and Larry Prior. develop and deploy the technologies needed to and mission-critical challenges in the United tomers’ trust and confidence in our experience, Larry Peck’s enterprise infrastructure group make the next generation oilfield a reality. States and even the world. At SAIC, it is our privi- ability, and integrity. I could talk about our strong also delivered market-beating growth and won lege to help meet those challenges. The high- ethics program, and the fact that SAIC has been one of SAIC’s most important contracts – the U.S. Discipline and entrepreneurship – the keys to caliber work that our men and women perform a member of the Defense Industry Initiative on Army’s Guardian Installation Protection Program. our future every day makes real contributions to the security Business Ethics and Conduct since its formation Most of our growth came from the national We are now working to build a stronger SAIC, bet- and defense of our nation, and to cancer research, in 1987. But the bottom line is how we execute security arena, where we continued to find new ter able to win and execute larger systems inte- education, environmental cleanup, robotics, space for our customers. SAIC executes approximately opportunities and win market share. gration contracts. At the same time, we continue exploration, and countless other areas. 9,000 contracts annually, and last fiscal year we Our work with civil agencies also showed solid to strengthen the parts of our culture that made I am especially proud of the SAIC employees had a 95% win rate on recompete contracts. growth and strong potential. As those agencies SAIC a multibillion-dollar engine of growth in who have made service to country a central part We earn our customers’ trust each time we upgrade their IT infrastructures, we expect to see professional services and smaller contracts.
  • 4. 4| |5 SAIC 2005 ANNUAL REPORT To do so, our culture is embracing both disci- experiences. Our future success depends on it. pline and entrepreneurship. The latter has always To do so, we strengthened initiatives to grow been in great supply in SAIC. We introduced moreEarningsper Share leaders, improveNetIncome diversity, and Diluted Earnings per Share Net Income Diluted Earnings per Share Diluted Net Income future workforce Millions Millions Millions of the former when we launched new strategic expand training opportunities. We also strength- $8$8 2005 $409 2005 $409 2005 $2.18 $8 2005 $2.18 $2,000 2005 $409 $2,000 2005 $2.18 our capabilities in pivotal jobs such as “pro- campaigns in what, we believe, will be our most ened $2,000 2004 $351 2004 $351 2004 $1.86 2004 $1.86 2004 $351 2004 $1.86 important growth areas. The experience and 2003 $1.28 manager” and “systems engineer.”$259 gram 2003 $259 2003 2003 $1.28 2003 $259 2003 $1.28 insights of our Directors and top managers $6 were Net gains from And we still believe our employee Netgains from ownership Net gains from Net gains from Netgains from gains from $6 Net $6 investment activities investment activities investment activities investment activities investment activities investment activities crucial in creating these campaigns, which will and sales ofofbusiness is one of the keys to motivate theof business culture and sales best and sales ofof business and sales business and sales business and sales of business $1,500 $1,500 $1,500 units and subsidiary units and subsidiary units and subsidiary units and subsidiary units and subsidiary units and subsidiary guide our efforts to capture future key contracts. common stock brightest to perform at top levels forstock and our common stock common stock common common stock common stock Our FY06 operating plan is tightly integrated customers. That’s why we continue to seek ways $4$4 $4 * All years presented with our**haveyears presented All years presented All new strategic campaigns and our stra- to strengthen this important part of our heritage been restated have been restated have been restated totoshow Telcordia show Telcordia to show Telcordia $1,000 $1,000 tegic imperatives asas technology development, Technologies, Inc. for – and our future. $1,000 Technologies, Inc. Technologies, Inc. as discontinued discontinued $2$2 discontinued $2 acquisitions, and improvements to our informa- operation operation operation tion technology infrastructure. $0 $0 $0 $0 $0 $0 ’01 ’05 ’01 ’05 ’01 ’05 ’01 ’05 Employee diversity and empowerment ’01 ’05 ’01 ’05 Going forward, we must hire, retain and grow the KEN DAHLBERG best and brightest from diverse backgrounds and CEO, President, and Chairman of the Board Revenues Operating Income Stockholders’ Equity Revenues Operating Income Stockholders’ Equity Revenues Operating Income Stockholders’ Equity Millions Millions Millions Millions Millions Millions Millions Millions Millions our group m anagement tea m: $500 $500 $500 $7,000 2005 $7,187 2005 $488 2005 $2,351 $7,000 2005 $7,187 2005 $488 2005 $2,351 $7,000 2005 $7,187 2005 $488 2005 $2,351 2004 $5,833 2004 $395 2004 $2,203 2004 $5,833 2004 $395 2004 $2,203 2004 $5,833 2004 $395 2004 $2,203 $3,000 $3,000 2003 $4,835 2003 $311 2003 $2,020 2003 $4,835 2003 $311 2003 $2,020 $3,000 2003 $4,835 2003 $311 2003 $2,020 $6,000 $6,000 $6,000 Group Presidents from left to right: $400 $400 $400 $5,000 $5,000 George Singley III, Trey Smith III, Mark Hughes III, $5,000 $300 $300 $300 $2,000 $2,000 Larry Peck, Carl Albero, and Lawrence Prior III $2,000 $4,000 $4,000 $4,000 $3,000 $3,000 $3,000 $200 $200 $200 $1,000 $1,000 $2,000 $1,000 $2,000 $2,000 $100 $100 $100 $1,000 $1,000 $1,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 ’05 ’05 ’05 ’05 ’05 ’05 ’01 ’01 ’01 ’01 ’01 ’01 ’05 ’05 ’05 ’01 ’01 ’01 Diluted Earnings per Share Diluted Earnings per Share Net Income Net Income Millions Millions $8 $8 2005 2005 $409 $409 2005 2005 $2.18 $2.18 $2,000 $2,000 2004 2004 $351 $351 2004 2004 $1.86 $1.86 All years 2003 2003 $259 $259 2003 2003 $1.28 $1.28 presented have Net gainsNet gains from from Net gainsNet gains from from SOLUTIONS GOVERNMENT $6 $6 for been restated investment activities activities investment investment activities activities investment and salesand sales of business of business and salesand sales of business of business to show $1,500 $1,500 units andunits and subsidiary subsidiary units andunits and subsidiary subsidiary common common stock stock common common stock stock Telcordia COMMERCIAL CUSTOMERS and $4 $4 Technologies, * have been restated restated * have been All years presented All years presented Inc. as a to show TelcordiaTelcordia to show $1,000 $1,000 Technologies, Inc. as Inc. as discontinued Technologies, discontinued discontinued $2 $2 operation operation operation $0 $0 $0 $0 ’01 ’01 ’05 ’05 ’01 ’01 ’05 ’05
  • 5. 6| |7 SAIC 2005 ANNUAL REPORT SYSTEMS ENGINEERING INTEGRATION AND How much IT security is enough? architecture and data network linking 22 agencies encompassing 180,000 employees. How much more value could you We did so on an incredibly accelerated schedule and won praise from then DHS CIO extract from your data systems Steve Cooper for our work. We are currently developing the ground- if they were compatible? How breaking architecture for a networked “system of systems” for the U.S. Army’s Future do you know if it’s the right time Combat Systems program. The Boeing-SAIC team is the Lead Systems Integrator for to innovate? How can you build this program. This enormously complex undertaking requires a system that is open more stability and reliability into and flexible to accommodate future needs while simultaneously employing the state an already complex and unwieldy of the art today. Since 2003, Boeing and SAIC have developed a common operating infrastructure when operational environment, launched an integration lab, and delivered a virtual framework and requirements and technologies integrated simulations – all while keeping the program on cost and on schedule. keep changing? At SAIC, we help The Joint Project Manager Guardian chose SAIC as Lead Systems Integrator for the customers answer tough questions Installation Protection Program that started last fiscal year. To help protect DoD installa- like these every day. tions, we are integrating chemical, biological, radiological, and nuclear protection systems Even more important, we deliver proven at up to 200 DoD installations worldwide. performance time and again on some of Installation protection is provided through the U.S. Government’s most complex and an integrated family of systems focused on important systems. continuity of the military mission. That’s why SAIC consistently ranks among But the best evidence for our expertise the top federal systems integrators year and commitment in integrating major after year. It’s also why customers choose systems comes from our longest-term SAIC for some of the most difficult systems customers. The Royal Saudi Naval Forces has integration tasks imaginable. worked with SAIC for more than a quarter After the Department of Homeland century. As part of our support to the Saudi Security opened its doors in 2003, we Navy, we integrated the first operational integrated its first-ever enterprise command and control system in the Persian SAIC Security Operations Centers, such as this one (above), deliver threat intelligence and managed security services to government and commercial clients worldwide. Our high cus- tomer retention rate testifies to the strength of this capability.
  • 6. 8| |9 SAIC 2005 ANNUAL REPORT FORTUNE magazine has ranked SAIC among America’s “Most Gulf region. Years later, the Gulf War began be repeatable and a higher level of customer and our system dramatically and successfully satisfaction. Admired Computer and Data Service Companies” for three scaled up and expanded its operations. When These were also some of the scoring consecutive years. Riyadh came under fire, SAIC personnel chose criteria when results were announced for to stay in country and support the system’s the U.S. Government’s Top 5 Quality Software operations. After hostilities ceased, Saudi Projects. Simulation software developed by authorities were lavish in their praise. SAIC for the U.S. Army was named a winner Our support continues today with major – for the second year in a row. new contracts to upgrade this large-scale C4I That software was developed by our system – and its communications networks SAIC Orlando organization, which has been – at the main naval headquarters in Riyadh, externally assessed at the highest level of at Western Fleet headquarters on the Red software and systems engineering maturity, integration Sea, and at Eastern Fleet headquarters on the CMMI® Maturity Level 5, as defined by the Persian Gulf. Software Engineering Institute of Carnegie Mellon University. Enterprise services integration. Large To achieve their success, our Orlando staff enterprises face increasingly tough combined high-quality CMMI® processes challenges to integrate and share massive with fast, flexible techniques derived from amounts of data from far flung and disparate extreme programming (XP), and spiral databases and legacy systems. development methods. They also facilitated One of the world’s largest enterprises collaboration across a government-industry and – the U.S. Department of Defense – has Integrated Product Team with a Web-based, enlisted SAIC’s help. collaborative, integrated development engineering A new SAIC laboratory evaluates existing environment. This winning combination is and emerging Web service technologies and now recommended by CrossTalk, the Journal service-oriented architectures to determine of Defense Software Engineering, in its tips for whether they have the “industrial strength” success. to become enterprisewide DoD solutions. All these elements were key to creating As impressive as this is, our new Enter- “a scalable, flexible, extensible, composable prise Services Integration & Interoperability architecture that is technically the best Laboratory is more than a technology proving simulation architecture I have seen in several ground. It also provides a wide range of tools years of working under the hood in military systems to help DoD application developers build simulations,” said Army Project Manager Lt. “new” capabilities from legacy systems and Col. John Surdu, who was quoted in CrossTalk. data. Tools ranging from Web-service adap- SAIC has organizations dedicated to tors and inference engines to ontological and this high level of software and systems semantic models help developers expose and engineering quality across the company. extract data and the business rules embed- Six SAIC organizations – encompassing ded within legacy systems. Other tools test 6,000 professionals – are rated at CMMI® for interoperability, deployability, scalability, Maturity Level 5. Ten SAIC organizations have and maintainability. achieved Level 3 maturity and eight have achieved Level 2 maturity. Our staff also help Software development. For customers, the government and commercial organizations benefits of higher software maturity ratings learn CMMI® methodology and they appraise are clear: greater assurance that complex other organizations for CMMI® compliance. (Above) SAIC’s Integrated Services Management Centers in North America, Europe and Asia help en- software programs will be on time, within Year after year, our staff have shown their terprises achieve both short- and long-term strategic goals regardless of their size. Operating under budget, and perform as expected. Add to that commitment to bring the benefits of high industry standard certifications for our signature IT services, we support global clients in such diverse greater assurance that project successes will software maturity ratings to our customers. industries as: healthcare, energy, utilities, academia, entertainment, and telecommunications.
  • 7. 10 | | 11 SAIC 2005 ANNUAL REPORT RESEAR CH DE VELOPMENT AND (Below left) Understanding how cancer forms from normal cells requires knowledge about the molecular path- ways in individual cells while they are in their normal environment. At the National Cancer Institute’s Confocal Microscopy Facility, SAIC researchers use living 3D tissue culture models to understand the molecular mechanisms that govern cells’ organization, their movement, how they invade within the body and mutate into cancer cells. As one of the largest science and with the National Institute of Allergy and Infectious Diseases, NCI, and the U.S. Army to technology organizations in the produce and test a promising recombinant protective antigen vaccine. We also help de- United States, SAIC conducts velop vaccines to combat other devastating diseases such as malaria and HIV. leading-edge research and devel- To accelerate translational cancer re- search, the NCI’s new cancer Biomedical opment from outer space to the Informatics Grid (caBIG) is helping with cross- disciplinary sharing of research between ocean depths. Our scientists and more than 600 cancer researchers from over 50 different cancer centers. SAIC is develop- engineers move the state of the ing important grid-based middleware, appli- cations, and security for this groundbreaking art forward in cancer and AIDS initiative. research, advanced signal process- Space technology. For decades, SAIC has con- ducted and supported leading-edge research ing, and modeling and simulation. for space exploration and global climate change. For the U.S. Geological Survey, we operate the EROS Data Center – the world’s Biopharmaceutical and medical research. largest collection of remotely sensed data for For the National Cancer Institute (NCI), we customers studying a variety of environmen- operate NCI-Frederick, one of the world’s tal issues such as land use and global change. premier cancer and AIDS research facilities. We develop and manage multiple database There we support a wide range of research architectures that are critical to the center’s areas, including development of nanotech- mission to make dynamic data products nology applications for the diagnosis, preven- readily accessible to customers worldwide. tion, and treatment of cancer. We also play a leading role in NASA’s hu- We work with NCI researchers to develop man spaceflight program, providing safety, nanoscale devices (less than 100 nanometers reliability, and quality assurance for the In- in size) that can deliver cancer therapeutic ternational Space Station, and helping NASA agents and anticancer vaccines at the cellular return the Space Shuttle to flight status. level. Smaller than a living cell, these tiny When the Cassini mission’s Huygens drug delivery devices will likely be able to probe descended through the atmosphere target only malignant cells, sparing healthy of Titan, Saturn’s largest moon, and began cells and reducing the side effects of today’s transmitting data and striking images of its cancer treatments. frozen surface, SAIC engineers and scientists To help expedite development of a next- could take pride in the historic event. We generation anthrax vaccine, we are working
  • 8. 12 | | 13 SAIC 2005 ANNUAL REPORT have supported this international research Modeling and simulation. SAIC pioneered mission since 1988. Among other things, we state-of-the-art technologies including dis- (Right) To better understand oceanic factors in global climate worked on the environmental and launch tributed simulation for training and distrib- change, we help NASA process, display, and analyze ocean-color safety analyses required because of the uted test and evaluation. Today, our expertise data gathered by satellites. Subtle changes in ocean color signify radioisotope-fueled devices that provide ranges from traditional areas, such as train- various types and quantities of marine phytoplankton (micro- electrical power and heat for Cassini. ing and analysis simulation, to emerging scopic marine plants), the knowledge of which has both scientific areas, such as simulation-based acquisition. and practical applications. Advanced signal processing. SAIC technolo- Currently, we lead the development of gists work on the frontiers of advanced signal DoD’s architecture and middleware for seam- and image processing. Over the years, we lessly integrating live-virtual-constructive pioneered breakthroughs in signal detection simulation for experimentation, training, and direction finding to protect submarines, test and evaluation, and acquisition. In addi- and automatically analyze synthetic aperture tion, we are the leaders in technology devel- radar images. Our engineers even devel- opment for entity-based simulation, simula- oped a new field of statistical detection and tion interconnection, and next-generation estimation theory, contributing to adaptive entity-based Computer Generated Forces. DEVELOPMENT Wiener filter theory and its application to radar and communications. Advanced robotics. With the military seeking We have been recognized for advancing to integrate unmanned systems into future the state of the art in adaptive processing forces, the DARPA Grand Challenge races pro- algorithms that use multiple degrees of vide a demanding environment to develop freedom to detect weak signals in complex and test new autonomous ground vehicles. environments. For example, we work on the During the 2004 race, the Sandstorm leading edge of space-time adaptive process- robotic vehicle, developed by Carnegie Mellon ing to detect weak radar echoes from ground University and SAIC, traveled much farther and targets in the presence of large radar noise than its competitors – successfully maneu- (motion-induced spread-Doppler clutter). vering across 12 kilometers of desert terrain RESEARCH Our work benefits the next generation of at an average speed of 36 kilometers per hour airborne surveillance radar systems. and a top speed of 56 km/hour. A leader in underwater signal processing The mapping and route planning soft- for three decades, SAIC provides critical ware we developed for Sandstorm has research and analysis to help the U.S. Navy provided valuable insights that could be used better detect hostile submarines and better for geospatial intelligence requirements for protect friendly submarines. With the rise in future military robotic systems. regional conflicts and asymmetrical threats, the emphasis has shifted from open-ocean Other innovative solutions. From advanced detection to shallow water near coastlines. radar systems to nonimaging optics, In these waters, acoustic interference our technology solutions are viewed as generated by surface ships and complex important tools for national security, bottom interacting acoustic propagation homeland defense, and the global war on pose new challenges. Our new algorithms terrorism. enable towed sonar arrays to better detect SAIC developed an advanced system that and track ships even as the sub towing the uses commercial HDTV broadcast signals sonar array maneuvers. We are also exploring to detect and track airborne and ground new acoustic signal processing algorithms moving vehicles. Currently deployed as a and advanced underwater acoustic pilot program, the system is being evaluated (Above) Micro satellites in low earth orbit over a combat zone could provide better reconnaissance for future tactical opera- communications using off-board sensors and as a potential “gap-filler” for airspace and tions. For the Air Force Research Laboratory’s experimental micro satellite program, we are developing a high-resolution unmanned vehicles. maritime surveillance. earth-observing system that includes a telescope and focal planes covering one panchromatic and three visible bands.
  • 9. 14 | | 15 SAIC 2005 ANNUAL REPORT SAIC 2005 ANNUAL REPORT DEFENSE TR ANSFORM ATION Providing a full range of more realistic and effective training for Future Combat Systems, our OneSAF system is integrated with the Common Architecture Desktop/Embedded Trainer crew station (below) and a soldier wearing a virtual simulator called DAGGERS during a simulated tactical exercise (right). By putting new strategic thinking able success and has moved from concept and design phase to systems design, develop- into action, SAIC helps the U.S. mil- ment, and demonstration. Today, more than two years into execution, the program has itary and its allies transform the passed numerous reviews and is on cost and on schedule. way they will fight future wars. Capitalizing on these successes, the Army restructured the program to accelerate pro- To help ensure our soldiers are curement of FCS capabilities. This restructure includes a means for spiraling FCS capabili- better equipped, protected, and ties into the current force as early as 2008. Getting warfighters the right information trained, we assist our customers in at the right place and time requires a world- wide network with enormous bandwidth. developing new technologies for The new Global Information Grid envisioned by DoD benefits from important SAIC con- the future, and spiraling advanced tributions throughout its architecture. For example, SAIC helps lead integration of the technologies into the current force. network’s cornerstone – the Global Informa- tion Grid-Bandwidth Expansion (GIG-BE) program. GIG-BE is bringing an optical mesh Network-centric operations. As a leader network with 10-gigabyte-per-second con- in the emerging area of network-centric nectivity to about 100 DoD bases, posts and operations, we are helping the military stations. Moreover, GIG-BE achieved initial achieve a powerful competitive edge through operating capability in only 20 months. advanced networked capabilities, shared situ- To exploit the bandwidth capabilities pro- ational awareness, improved collaborative vided by GIG-BE, SAIC is supporting the DoD planning, and enhanced speed and agility. Net-Centric Enterprise Service (NCES) initia- Our work benefits transformational deci- tive. NCES will provide the software services sions at the highest levels of the Defense framework to enable information sharing Department and what may be the most and collaboration by future command and ambitious and far-reaching program for net- control, business, and intelligence systems. work-centric operations in the U.S. military SAIC’s team is providing systems architecture, services – the Army Future Combat Systems technical integration, and technology deploy- (FCS) program. As the Lead Systems Integra- ment support to DISA as the agency pilots tor for FCS, the Boeing-SAIC team is working capabilities to Defense Computer Centers. to speed delivery of crucial network-centric And the lead joint military command and capabilities to the current force. control system that will operate over the GIG The FCS program has met with remark-
  • 10. 16 | | 17 SAIC 2005 ANNUAL REPORT “SAIC’s competitive strategy of knowing their customers, anticipating their needs, and (the Global Command and Control System- Simulation software developed by SAIC prom- Joint) was also previously integrated by SAIC. ises to be the new “gold standard” in both suggesting innovative solutions has made them one of the most trusted and influential All of this gives SAIC absolutely unmatched areas: training and software design. Designed high-level systems integrator’s in the C4ISR community.” expertise in command and control and net- for the U.S. Army, this OneSAF simulation work-centric technologies. software has been chosen as the simulation 2004 Frost & Sullivan Competitive Strategy Leadership Award presented to SAIC engine for the Army Future Combat Systems, New operational concepts for new threats. named one of the Top U.S. Government Transformation requires continuous in- Software Projects, and adapted by the Marine novation. As a pioneer in the Revolution in Corps for use in their Combined Arms Staff Military Affairs, SAIC has been instrumental in Trainer. developing much of the conceptual founda- OneSAF’s flexible architecture can meet tion for DoD’s approach to transformation. For the full spectrum of simulation needs, from example, we helped develop, test, and refine developing new operational concepts and such capstone concepts as dominant maneu- engineering research to mission planning and ver and long-range precision strike. after-action training reviews. SAIC is at the heart of defense transforma- TRANSFORMATION tion at U.S. Joint Forces Command, the “trans- Technology transformation. We develop formation laboratory” for the U.S. military, and leading-edge technologies to solve complex at NATO’s Allied Command Transformation. problems facing our forces. For example, Our analysts develop future warfighting con- we are exploring solutions to better pro- cepts, such as Effects Based Operations and tect combat vehicles from rocket-propelled Operational Net Assessments, which require grenades and other threats. Working with the a rich systemic understanding of opponents Army Research Laboratory, we successfully and operational environments. Many of these demonstrated an electromagnetic (EM) armor concepts are being implemented today. For system to protect a combat vehicle’s flank. example, our support to joint urban opera- EM armor and electric weapons require tions includes concept modeling and analysis large amounts of pulsed electric power. At with the Joint Semi-Automated Forces simula- the same time, future combat vehicles must DEFENSE tion system, resulting in better understanding be lighter weight, more mobile, and more of urban operations in Iraq and Afghanistan. fuel-efficient. Hybrid electric power systems For the Joint National Training Capability, promise to meet all these requirements once SAIC is helping develop a persistent, global major technical challenges are overcome. We network of live, virtual, and constructive are working to overcome these technical chal- simulation components that serves as a lenges at a systems integration laboratory we seamless training environment to joint and helped build and operate for the Army. service forces. This key transformation initia- Lighter, more efficient power is also the tive and others are supported from SAIC’s new goal for radios, computers, and hand-held GPS facility in Suffolk, Virginia, where the Joint units, and for our DARPA-funded research in System of Systems Collaborative Environment nanocomposite photovoltaic technology. Laboratory serves as a portal to the network. Our analysts also identify and develop new Base realignment. Our wide-ranging environ- intelligence and C4ISR technologies for joint mental services support the transformation forces. and realignment of DoD missions, facilities, and systems. We support property remedia- Training for the future. Transformational tion through full-service environmental reme- (Above) Soldiers in combat could soon have important new advantages thanks to two unique SAIC concepts. By riding this systems of systems rely on well-trained forces diation contracts with the Army. And we pro- all-terrain vehicle to a combat zone, a soldier would be able to flip a switch, convert the vehicle to robot mode, and tele- and well-designed software, both of which vide environmental assessment, analysis, and operate the vehicle as it conducts unmanned missions in dangerous areas. In order to engage quickly and accurately during need to perform successfully when called up. compliance support to the Air Force and Navy. close combat at night, the night vision goggles import an aligned view from a separate infrared sight on the weapon.
  • 11. 18 | | 19 SAIC 2005 ANNUAL REPORT SAIC 2005 ANNUAL REPORT LOGISTICS PRODUCT SUPPORT AND (Below) Our Radio Frequency Identification (RFID) solutions help streamline the movement of materials by improving asset visibility, tracking, and accuracy. At the Fleet and Industrial Supply Center Norfolk, SAIC implemented one of DoD’s first fully integrated passive RFID in- stallations. The system provides real-time visibility for more than 150,000 tagged pieces of material flowing through the terminal annually. During Operation Iraqi Freedom, New ways to “sense and respond” to troop needs. As light-armored vehicles, troop car- U.S. warfighters had the technol- riers, and combat-equipped Humvees raced toward Baghdad, they sometimes outran ogy edge but their rapid advances fuel supplies. We are working to make fuel shortages a thing of the past by developing occasionally outran logistics new concepts and solutions in “sense and respond” logistics. support. To keep up with “light- For the U.S. Army Logistics Transformation Agency, we are implementing sensors on ning-fast” military operations, 5,000-gallon fuel tankers and the 10,000-gal- lon fuel storage “bladders” and integrating logisticians need some of the same those sensors into a prototype “sense and respond” system. A key feature of the system technology advances that SAIC has is our adaptive agents (actually sophisti- cated software codes) that review sensor delivered to the warfighters: data, compare it with data from command and control systems and other sources, and better intelligence sensors, com- decide what supplies should be ordered and when. In other words, we’re designing the munications networks, and ana- system to receive near real-time information on where the battle is going (from command lytics. At the same time, military and control system data), and respond to supply needs “on the fly” as battlefield condi- logisticians need the best supply tions change. Today’s system responds to fuel needs, but tomorrow’s system potentially chain solutions from the commer- could better meet the ammunition needs of troops in the heat of battle. cial sector: demand forecasting, In the field, not the depot. While our “sense total asset visibility, and just-in- and respond” system is still experimental, our intelligent agent technology has proven time inventory. At SAIC, we are de- its success on major Integrated Prime Vendor programs for the Defense Logistics Agency livering on all of these and more, (DLA). We use this technology to supply more than 127,000 items – ranging from bench as part of our commitment to give stock to aircraft subassemblies and engine and landing gear components – to the Air logisticians the technical edge. Force depots and mechanics that maintain