- The Washington Times - Monday, February 12, 2007

Government contractor DynCorp International is gearing up for its portion of a Defense Department contract worth up to $4.65 billion to provide Arabic translation services in support of the Iraq war.

“It’s definitely a challenge,” said Gregory Lagana, spokesman for DynCorp International, a Falls Church-based defense and commercial technical services provider.

A joint venture the company organized plans to hire as many as 6,000 local translators and 1,000 U.S. citizens as part of the contract.

DynCorp International’s profit jumped by seven times in the quarter ending Dec. 31 compared with a year earlier.

Its stock, DCP on the New York Stock Exchange, is up about 6 percent since the Defense Department contract was announced Dec. 18.

DynCorp International beat out military contractor L-3 Communications Holdings, which anticipated earning $600 million from the translations contract this year. L-3 Communications responded by filing a protest with the Government Accountability Office.

The contract dispute is being overshadowed by recent charges from the federal government’s inspector general for Iraq reconstruction that several contractors, including DynCorp International, engaged in excessive spending.

While the L-3 Communications protest is pending, the joint venture with McNeil Technologies, called Global Linguistic Solutions, is figuring out strategies to provide the linguistics services.

The exact portion of the $4.65 billion over five years that DynCorp International gets from the Defense Department “will depend on how much service they want,” Mr. Lagana said. “It’s still a huge contract.”

DynCorp International’s other services include aviation maintenance, law-enforcement training, narcotics eradication, warehousing, facility operation and construction and other outsourced technical services.

The U.S. Army announced another major contract to the company this month to maintain its aircraft.

DynCorp agreed under the $95.6 million contract to provide support for the Army’s entire fleet of C-12, RC-12 and UC-35 fixed-wing aircraft.

Last week, the company reported net earnings for the most recent quarter of $11.6 million, or 20 cents a share, compared with $1.63 million, or 5 cents a share, in the same period last year. Its revenue fell 6.5 percent to $517.5 million from $553.6 million on year earlier. The company said it expects to earn revenue of $2.05 billion to $2.1 billion in fiscal 2007.

The company’s stocks started being publicly traded last May. Its stock closed yesterday at $17.11 per share, up 11 cents, or just under 1 percent from Friday’s close.

Herbert J. Lanese, DynCorp International’s chief executive officer, took time from his conference call last week with stock market analysts to deny the government inspector general’s accusations of irresponsible spending.

“It’s unfortunate that some of these things get sensationalized the way they do, but that’s the business we’re in,” Mr. Lanese said.

The inspector general’s report last month said the State Department paid $43.8 million to DynCorp International for an Iraqi police training camp that stood empty for months. About $4.2 million of the money was spent on 20 VIP trailers and an Olympic-size pool, the report said.

DynCorp International might have spent another $18 million of government money for expenses that were hard to justify, the inspector general said.

Stock analysts are generally upbeat about the company’s earning potential but warn of risks from the politically volatile war zones in which it operates.

“DynCorp International stands to benefit from an unmistakable and persistent goal to shrink the government’s civilian work force and outsource a progressively larger portion of consistently growing defense, diplomatic and homeland security budget spending,” Peter J. Barry, research analyst for financial firm Bear Stearns said.

However, “we cannot ignore the business and investment risks associated with customer concentration and the headline risk attendant to some of the company’s high-profile, politically charged, often clandestine or classified, business activities in places like Afghanistan and Iraq,” Mr. Barry said.

Myles Walton, analyst for financial firm CIBC World Markets, called DynCorp International’s third-quarter earnings “encouraging.”

He added, “As the U.S. moves closer to drawing down U.S. armed forces in Iraq and Afghanistan, it’s possible that Iraq sensitive defense contractors, like DynCorp, will experience negative news flow and sentiment effects.”

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