SAIC Inc. Annual Report 2007

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FY2007 Annual Report · SAIC Inc.

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SAIC Annual Report Fiscal Year 2007

(On the front cover) SAIC employees work on some of the toughest problems facing the United

States and the world. Above, SAIC operates the National Cancer Institute’s leading center for

cancer and AIDS research, NCI-Frederick. Maria Falcon, right, is part of an SAIC team, below,

that supports the Department of Defense’s efforts to install chemical, biological, radiological and

nuclear protection capabilities at U.S. military installations.

(Below) Network engineer Mohamed Kaloko, left, works on leading-edge biometrics-related

projects; lead engineer Philip Wise, right, supports intelligence and security customers; and

systems engineer Donna Maldonado provides IT support to a major energy customer.

(On the back cover) Engineer Robert Pervere operates a reconnaissance robot.

Protecting our country.

We take it personally.

Table of Contents

Message to Stockholders

Financial Highlights

Solutions for Government and
Commercial Customers

Homeland Security

Intelligence

Defense

Command, Control, and Communications 12

Logistics and Product Support

Technology and Innovation

Commercial

Team SAIC

Life@SAIC

Board of Directors

Message to Stockholders

We reached important milestones in fiscal year 2007 (FY07), with our initial public offering

of stock prominent among them. The success of our IPO was a tribute to the hard work

and innovation of our 44,000 employees. For more than 37 years, the company operated a

business model that created a legacy of innovation and entrepreneurial growth that we believe

is unmatched in our industry. To reach the next level of growth, the company is in the midst of

change.

We are making the company more collaborative, more efficient and more disciplined

with the tools and training to scale to larger programs and a much higher revenue base.

We reinvigorated our business development function and invested in building a pipeline of

opportunities; we are starting to get traction in terms of collaborating as a company on the large

wins that are keys to achieving our growth goals.

This spirit of collaboration has helped us reach another important milestone – we made our

first Sarbanes-Oxley compliance attestation, and we accomplished it one year in advance of

our requirement to do so.

A Strategy for Success. Our entire company is committed to executing the objectives we

laid out during our IPO road show – accelerating organic growth, expanding operating margins

and making strategic acquisitions. That strategy is already showing good results. Driven by the

technical solutions and operational support that we delivered to the intelligence community and

homeland security markets, the company completed its 38th year in strong fashion. Incremental

revenues were generated under several intelligence contracts, our new NATO Active Layered

Theater Ballistic Missile Defense contract, and orders and delivery of cargo and container

inspection systems. In addition, we saw solid growth in providing professional services to

government and commercial customers in the energy, public health and environmental

sciences markets. In the energy markets, we have generated strong growth in IT optimization

and outsourcing for large oil, gas and utilities customers worldwide.

Revenues for our FY07, which ended January 31, 2007, were $8.3 billion, up 7% from FY06.

Operating income for FY07 was $585 million, up 19% over the previous fiscal year. Income from

continuing operations was $369 million, up 8%. Cash flow from operations was $704 million, up

20% from the previous fiscal year.

We are committed to improving top line revenues and bottom line margins while generating

solid operating cash flow.

Strategic Acquisitions. During FY07, we made key strategic acquisitions to expand our

capabilities in high-growth markets, such as intelligence and logistics and product support, and

CE O Ken Dahlber g

to broaden our technical expertise. To enhance our intelligence offerings, we acquired Applied

Marine Technology Inc., a leading provider of services, products and expertise, particularly to

the special warfare and intelligence communities, including the areas of homeland security and

the Global War on Terrorism. We also acquired bd Systems Inc., which gives us more capability

and a greater footprint in aerospace engineering, with strong positions at Northern Command

and at the Space and Missile System Center.

Our acquisition of Varec Inc. expands our logistics offerings in the defense, aviation, and

oil and gas markets. To grow our technology base, we acquired AETC Inc., which enhances

our expertise in remote sensing technology, and Applied Ordnance Technology, which

complements our capabilities in ordnance and weapons systems engineering and design.

Looking to the Future. To sharpen our market focus and better serve our customers, we

recently announced that we would reduce our number of groups from five to four. The move

was aimed at aligning key research and technology capabilities more closely with strategic

business thrusts to better serve our customers. We have brought our IT service business

across all markets into a single group, and we have focused our defense mission expertise in

one group to improve our competitiveness.

SAIC’s business units are its engines of innovation and growth; to improve our alignment

and facilitate collaboration, we shifted these units, intact, between our groups.

An important dimension of these changes is leadership at SAIC. We are conducting the

succession planning necessary for long-term success. We are recognizing and developing our

high-potential leaders and promoting from within.

In another move toward the future, we have reached a mutual agreement with the Greek

government on a contract modification that allows SAIC and its teammates to deliver a state-of-

the-art security system. The modification clarifies the parties’ obligations on this large contract,

which was begun before the 2004 Athens Olympics but had fallen into dispute.

In summary, with our outstanding workforce aligned behind our strategies, we have the

people, tools and structure needed to position us to achieve our long-term strategy and

objectives. We are on track to maintain our momentum in FY08.

Ken Dahlberg

CEO and Chairman of the Board

Financial Highlights

Revenues
Millions

$9,000

2007 $8,294
2006 $7,775
2005 $7,172

Operating Income
Millions

$600

2007 $585
2006 $490
2005 $483

Stockholders’ Equity
Millions

$3,000

2007 $1,536
2006 $2,807
2005 $2,351

$6,000

$3,000

’03

$300

’07

’03

’07

Diluted Earnings per Share

For Revenues and

Operating Income, all

years presented have

been restated to present

Telcordia Technologies,

Inc. and ANXeBusiness

Corp. as discontinued

operations. In addition,

Diluted Earnings per

Share have been restated

to give effect for the

reorganization merger in

connection with our initial

public offering.

2007 $1.07
2006 $2.58
2005 $1.09

$2.50

$2.00

$1.50

$1.00

$.50

$2,000

$1,000

’03

’07

Net Income
Millions

$900

2007 $391
2006 $927
2005 $409

$600

$300

’03

’07

’03

’07

Solutions for Government and
Commercial Customers

With more than 44,000 employees in over 150 cities worldwide, SAIC engineers and scientists solve complex

technical challenges in key business areas such as homeland security; intelligence; defense; command,

control, and communications; logistics and product support; and commercial services.

Our line management team for FY08:
Group Presidents (above from left) Deborah Alderson, Joseph Craver III, Charles Koontz and Lawrence Prior III

Homeland Security

(Below) SAIC’s Don Yost, Mark Hamilton, Bobbie Helbringer, Shannon Phillips,

Chris Watson and Brad Rarig test and demonstrate CBRN systems at the

Integration Assurance Center in Edgewood, Md., the technological hub for the

Guardian program. (Opposite page) SAIC’s VACIS® P7500 high-energy container

inspection system is designed for high-volume ports and transportation

facilities that require high-throughput inspection of dense cargos, yet have

significant space limitations for installing inspection equipment.

Under one of its largest homeland security contracts, SAIC achieved a major program milestone last

year by completing the installation of chemical, biological, radiological and nuclear (CBRN) protection

capabilities at 35 U.S. military installations. As the Lead Systems Integrator for the Joint Program Executive

Office for Chemical and Biological Defense’s Guardian Installation Protection Program, SAIC is leading the

Department of Defense’s first efforts to field a full spectrum of CBRN installation protection capabilities to

U.S. military facilities.

SAIC organizations have trained over 300,000 first responders to prevent and respond to terrorist acts,

especially those involving weapons of mass destruction (WMD). To help the Defense Threat Reduction

Agency (DTRA) provide warfighters and civil first responders rapid access to WMD planning, emergency

response and assessment capabilities, SAIC is moving DTRA chemical, biological, radiological, nuclear

and high explosive modeling and simulation tools to a common architecture and Web portal.

Securing Borders and Ports of Entry. With more than 300 of its VACIS® inspection systems

deployed worldwide, SAIC is a leading provider of efficient, effective and compact cargo inspection

systems. Building on this success, SAIC launched its VACIS® P7500 inspection system, which uses SAIC’s

patented drive-through technology and provides a small footprint with high throughput, scanning up to 150

cargo containers per hour.

To accelerate the next generation of inspection technology, the Department of Homeland Security

(DHS) selected SAIC and two other firms to develop prototypes under the Cargo Advanced Automated

Radiography System Program. SAIC is designing its prototype to automatically detect radiological and

nuclear materials, such as weapons-grade plutonium, even if shielded by other materials.

For the Transportation Security Administration (TSA), SAIC is responsible for the management and

disposition of voluntarily abandoned property, including hazardous materials, collected at TSA’s security

checkpoints at more than 440 commercial airports located throughout the United States and its territories.

IT Solutions. Continuing to support DHS’ vital missions, SAIC is playing a key role in the Enterprise

Acquisition Gateway for Leading Edge Solutions Program, also known as EAGLE, a departmentwide

platform for acquiring IT solutions. DHS selected 25 companies to participate in EAGLE, but SAIC was

one of only four contractors to receive awards in four functional categories, including infrastructure

engineering, operations and maintenance, software development, and management support services.

Defending Against Disease. SAIC is helping DHS develop the National Biosurveillance Integration

System (NBIS), intended to integrate up to 120 systems in multiple government agencies that monitor

health, environmental and intelligence information. The goal: to detect and respond more quickly to any

biological event – whether man-made or natural.

Intelligence

(Left) Engineer Robert Pervere operates one of our R-500 reconnaissance ro-

bots that not only “sees” day or night but also “hears.” Designed for afford-

ability, the extended-range robot can be used for a variety of military and law

enforcement missions. (Above) Network engineer Mohamed Kaloko works on

cutting-edge biometrics technologies at SAIC’s Center for Operational Biomet-

rics, a multipurpose facility for technology evaluations and rapid prototyping.

SAIC develops solutions to help the U.S. defense and intelligence communities build an integrated intel-

ligence picture, allowing them to be more agile and dynamic in challenging environments.

Enhancing Operational Intelligence. To help transform the way the military collects, analyzes and

disseminates mission-critical intelligence information, SAIC developed and deployed the Joint Intelligence

Operations Capability-Iraq (JIOC-I). It combines battlefield intelligence into a single, integrated network that

delivers information to the right people at the right time. In addition, JIOC-I interfaces with systems such as

the SAIC-supported Biometrics Automated Toolset (BAT), which is helping analysts break up terrorist cells

and track and capture the enemy. BAT is a portable system that records an individual’s unique character-

istics for iris, fingerprint and facial recognition. Working with the U.S. Army, SAIC successfully transitioned

JIOC-I capabilities into the Distributed Common Ground System-Army (DCGS-A). One of the Army’s

premier intelligence collection and dissemination systems, DCGS-A will support additional programs such

as Future Combat Systems. SAIC continues to integrate additional capabilities into DCGS-A.

Geospatial Intelligence Support. As one of the principal contractors supporting the National

Geospatial-Intelligence Agency, SAIC provides geospatial production and exploitation and dissemination

system development. SAIC is also helping the U.S. Army develop and deploy innovative geospatial

products and technologies to empower warfighters at all levels through timely information and knowledge

management for operational decision support. Under this major new contract, SAIC provides a broad

range of services, including sensor research and development, support of geospatial systems and

systems engineering. To expand its geospatial offerings, SAIC acquired Geo-Spatial Technologies Inc.,

which develops technologies for advanced 3-D imaging, reconnaissance, and remote sensing systems.

National Security and Space. SAIC provides systems engineering and integration support to the

U.S. Air Force Space and Missile Systems Center and the Global Positioning Systems Wing, and provides

key engineering support to the U.S. Air Force Space Command. SAIC also supports the National Recon-

naissance Office in the development of a number of advanced technology solutions addressing space

superiority.

Predator Operations Center. Pilots who fly the unmanned Predators and the military analysts who

identify threats rely on SAIC for 24/7 technical support at the Nellis Air Force Base Predator Operations

Center. SAIC also helps to ensure that analysts have current intelligence to identify and track targets.

Special Operations. To enhance its support of the intelligence and special warfare communities,

SAIC acquired Applied Marine Technology Inc. (AMTI), which provides a broad range of services, products

and expertise. In addition to its core offerings, AMTI designs, develops and manufactures communica-

tions, information technology, personal protection and explosive ordnance disposal products.

Defense

(Below) SAIC’s John Holland, product manager for the 155mm Non-Line of Sight Cannon

(NLOS-C), and system integrators Brent Jorgenson and Scott Robbie inspect the

NLOS-C Firing Platform. The NLOS-C is one of the first pieces of hardware to emerge

from the Manned Ground Vehicle portion of the FCS program. (Opposite page) Software

engineer Tara Crawford works on OneSAF, a single semi-automated forces computer

simulation system used throughout the Army’s advanced concepts, research and

training domains.

SAIC and Boeing are teamed as the Lead Systems Integrator (LSI) on the Future

Combat Systems (FCS) program – the centerpiece of the U.S. Army’s modernization

strategy.

FCS is the key part of the Army’s overall strategy to field a modernized, modular

and sustainable force capable of responding to a wide variety of contingencies from

humanitarian operations to full spectrum combat. The current program requires the

development, integration and eventual delivery of the complete FCS Brigade Combat

Team (BCT). The work effort will deliver vital interdependent capabilities to our

soldiers, including key networked lethality, survivability and sustainability capabilities

that will enhance current brigade combat teams.

As part of the network capability, SAIC is working with Boeing to develop and

integrate the network software, including an estimated 17.1 million effective software

lines of code in the objective FCS operational computing environment. SAIC also is

helping to integrate nearly 100 software subsystems into FCS.

In a major milestone on the path toward providing key capabilities for both the

current and future BCTs, the LSI recently completed a three-phase effort: Experiment

1.1. This effort combined laboratory and field experiments to test early FCS

prototypes and help mitigate technical risks associated with their critical technologies

and advanced concepts. The LSI spearheaded this effort, with SAIC taking a lead role

in a variety of areas, including execution of all unmanned aerial vehicle tests, overall

technical integration for the experiment, and integration of FCS simulations into the

operational hardware and software environment.

SAIC, as part of the LSI, is playing a pivotal role in deploying new capabilities to

the Army through participation in all three capabilities areas: the network, Spin Outs

to the Current Force and the Future Brigades. Under Boeing and SAIC leadership, the

program has stayed on cost and schedule for more than three years.

Advanced Armor Systems. The most deadly improvised explosive device used

in Iraq is the “explosively formed penetrator,” or EFP, which can penetrate vehicle

armor. SAIC is exploring technologies aimed at defeating EFPs as well as rocket-

propelled grenades armed with “shaped charge” warheads on a broad variety of

platforms, ranging from legacy systems to future systems.

Precision-Guided Munitions. Since 1992, SAIC has been a leading developer

of advanced projectile solutions for U.S. naval surface fire support applications. The

SAIC smart-munitions products involve gun-launched Global Positioning System-

guided projectiles that deliver a variety of warheads. SAIC’s expertise includes

systems engineering, guidance and control, and aeroballistics.

Command, Control, and Communications

(Opposite page) For decades, SAIC has provided command, control, and

communications (C3) systems to support warfighters at sea, on land or in the

air. (Below) SAIC’s Julie Hadley and senior systems engineer Andrew Hunt

showcase some of the company’s wide-ranging technical expertise, including

its C3 capabilities, at SAIC’s new Science to Solutions Center in McLean, Va.

Just two years after its founding in 1969, SAIC won its first command, control, and communications

(C3) contract. SAIC research was applied to various missile systems – including the Anti-Ballistic Missile

system, Minuteman, and Polaris – and the results were incorporated into a comprehensive code for

modeling C3 engagements. Today, SAIC continues working to give the U.S. military and allies a winning

advantage on the battlefield by providing them with C3 systems that help them successfully plan, direct,

coordinate and control their forces.

Defense Information Systems Agency (DISA) Support. When military commanders have sophis-

ticated command and control capabilities to communicate instantaneously with each other from multiple

locations around the world, they have information superiority. Over the years, SAIC has helped strengthen

and expand DISA’s information network to an effective warfighting communications capability.

SAIC served as the lead systems integrator supporting DISA for the design, acquisition, integration,

implementation, and operation of a network with enormous bandwidth that transmits at 10 gigabits per

second. This optical mesh network – provided by the Global Information Grid Bandwidth Expansion pro-

gram – connects major critical sites worldwide, providing access to more and better real-time information.

In addition to supporting the core DISA network mission, SAIC is a prime contractor on the Next

Generation Engineering contract, a multiple-award DISA vehicle that provides support for engineering and

interoperability of core mission areas for DISA, the Department of Defense and other federal agencies as

well as telecommunications services, enterprise computing and future engineering requirements. SAIC,

as one of the I-Assure prime contractors, has also provided systems security engineering support to key

DISA programs as well as life-cycle security support to DISA legacy systems.

Air and Space Operations Center Weapon System Integrator. SAIC is part of an industry team

working with the Air Force to standardize, modernize, sustain and transform more than 20 Air and Space

Operations Centers worldwide into interoperable network-centric weapon systems. The goal is to provide

commanders with real-time, common operational views of the global battlefield to enable joint and

coalition warfighters to continue to dominate command and control in future conflicts, while improving

operational efficiencies.

NATO Active Layered Theater Ballistic Missile Defense. SAIC is leading a multinational team

drawn from seven countries in Europe and the United States to develop a layered theater ballistic missile

defense for the North Atlantic Treaty Organization (NATO). NATO is working to tie existing and planned

national weapon systems, sensors, battle management, command, control, and communications into an

integrated defense for the protection of alliance military forces and critical assets. The SAIC-led team will

design defense architectures, build an integration test bed, and test and verify the performance of NATO’s

systems for protecting military forces in harm’s way.

Logistics and Product Support

To help improve the readiness and operational capability of warfighters and their

weapons systems, SAIC provides a wide range of logistics and product support

solutions.

From the Joint Staff J4 to the warfighter in the field, the military chain of command

requires timely, accurate information on the status and movement of critical assets.

SAIC manages the Web portal that provides end-to-end asset visibility of the

Department of Defense (DoD) logistics pipeline.

SAIC is developing a sense-and-respond logistics capability for mining large

volumes of data to provide theater commanders with dynamic distribution planning

tools and the information they need to avert and avoid shortages, readiness

degradation, operational impacts and other crises.

To help DoD locate lost shipments, SAIC implemented a passive radio frequency

identification (RFID) tracking system for a pilot program that generated savings by

locating more than $12 million of missing material.

Sharpening Readiness. Contributing to global military readiness, SAIC provides

the Defense Logistics Agency with integrated supply services for spare and repair

parts for U.S. Army and U.S. Marine Corps wheeled and tracked ground vehicles.

In addition, SAIC is helping the U.S. Air Force update its Product Data Management

system by integrating custom-developed software with existing legacy systems.

The system is designed to give technicians more user-friendly and up-to-date digital

technical data.

For the U.S. Air Force’s Warner Robins Air Logistics Center, SAIC is overseeing

the refurbishment of five C-130 aircraft that the U.S. government is turning over to the

Polish Air Force. SAIC’s responsibility for the refurbishment includes replacing the

center wing boxes of the aircraft and implementing an avionics upgrade.

Reducing Costs. Using its SCOPTIMA™ supply chain management system,

SAIC helped the U.S. Navy reduce inventory costs by $12 million without impacting

production at three naval aviation depots.

Working with DoD, SAIC is helping to synchronize medical and surgical product

data between hospitals and suppliers in a Product Data Base (PDB). By using the PDB

to identify the best-contracted price for medical and surgical products, DoD hospitals

have saved more than $10 million. SAIC is testing expansion of this capability to

commercial industry.

To help the Federal Motor Carrier Safety Administration (FMCSA) improve its

business services to customers, SAIC is modernizing the FMCSA’s legacy systems

into a service-oriented architecture.

Strengthening its position in the fuels industry, SAIC acquired Varec Inc. in

FY07. Varec provides automated fuel management hardware and software to

track bulk storage and tactical/mobile fuel inventories and disbursements, with the

FuelsManager® software suite, at more than 600 DoD bases worldwide – including

Afghanistan and Iraq.

(Below) At Naval Air Station North Island in San Diego, information manage-

ment specialists Leisa Biddle, left, and Cupa Camacho and Alma Sandoval

(above) help keep critical parts in stock and available for F-18 fighter jets,

Harrier jets, Huey and Cobra helicopters, and other aircraft.

Technology and Innovation

(Opposite page) NASA honored SAIC’s Chel Stromgren with the Exceptional Engineering Achievement

Medal for helping NASA improve strategic analysis of the space shuttle and International Space

Station. (Below) Dr. Stan Burt (center), Director of the Advanced Biomedical Computing Center

at NCI-Frederick, discusses applications of advanced imaging technologies in the diagnosis and

treatment of diseases such as cancer and AIDS with staff members (left to right) Administrative

Assistant Stacy Beachley, Programmer Analyst III Karol Miaskiewicz, Head of Networks and Security

Bill Boyer, and Scientific Analyst III Sarangan Ravichandran.

From advances in medicine to advanced work in directed energy and space flight assurance, SAIC’s deep

domain expertise and innovation help customers solve their biggest technical challenges.

Biomedical Research. For more than a decade, SAIC has operated the National Cancer Institute’s

leading center for cancer and AIDS research, NCI-Frederick. Recently, NCI-Frederick researchers

discovered that adding a second drug to tamoxifen – a successful breast cancer drug – could help

tamoxifen retain its full strength indefinitely.

In addition, for the National Institute of Allergy and Infectious Diseases, NCI-Frederick manufactured the

first DNA vaccine designed to prevent H5N1 avian influenza infection. The bird flu vaccine prototype went

from the research bench into clinical trials in less than six months.

In addition, NCI-Frederick researchers created a virus DNA microarray that can detect all known

human, mammalian and avian pathogenic viruses. This virus chip, which contains thousands of DNA

features immobilized on a glass slide, is scanned for signals using computer software to identify specific

DNA and RNA virus particles. The chip can be used for speedy detection of bird flu and other viral disease

outbreaks.

Space and Aerospace. In FY07, NASA’s Johnson Space Center awarded SAIC the contract to

continue providing safety and mission assurance support services for the space shuttle and International

Space Station (ISS), payloads and other items prepared for space flight. SAIC supports numerous

technical and process issues, future programs and new technologies for the nation’s human space flight

programs. Highly trained in safety, reliability and quality, SAIC analysts, engineers and technicians are an

integral part of management decisions, flight control, and mission support. Their expertise helps ensure

successful missions and the safe return of the crews.

In addition, NASA honored SAIC’s Chel Stromgren with the Exceptional Engineering Achievement

Medal for his work helping NASA to improve strategic analysis of the space shuttle and ISS.

In FY07, SAIC acquired bd Systems Inc. to expand technical and operational capabilities in the

aerospace marketplace. The acquisition reflects SAIC’s commitment to the nation’s critical mission of

maintaining space superiority.

Directed Energy Research. Directed energy weapons, such as high-power microwaves and high-

energy lasers, can degrade or destroy improvised explosive devices. Drawing on a wealth of test and

evaluation experience, SAIC is the Lead Systems Integrator (LSI) for the DoD’s Directed Energy Test and

Evaluation Capability Program. As the LSI, SAIC is helping develop 12 means to test and evaluate such

microwave and laser systems.

Commercial

By leveraging the depth and breadth of its technical and industry domain expertise, SAIC helps solve

commercial business problems for multinational customers. SAIC provides solutions for the oil and gas

industry, utilities, pharmaceutical and life sciences clients, the UK public sector, health care customers,

and state and local governments.

Global Expansion. SAIC is leading the transformation of several supermajor oil and gas producers

by developing onshore and offshore Next Generation Oilfield systems for production optimization, remote

collaboration centers, and command and control automation. In addition, as several new oil fields are

developed in Asia and Africa, SAIC is helping to optimize those operations through business process

modeling and automation.

Global Data Management. SAIC provided a global data management solution for a supermajor oil

and gas company that integrated each of the client’s data assets across eight independently managed

sites. The improvement in data integrity and access has improved customer profitability and reduced

compliance risk.

Drug Discovery and Development. SAIC is also applying its capabilities in unstructured data

analytics and its life sciences expertise to support Pfizer, Invitrogen and other pharmaceutical clients. A

key SAIC differentiator in this area is its ability to re-purpose tools, technologies and methodologies used

in its federal intelligence business to the application of drug discovery and development.

Information Technology Outsourcing. Following the crisis management support it provided to

Entergy Corporation in restoring utility operations after Hurricanes Katrina and Rita, SAIC was awarded

a major follow-on contract to provide infrastructure and applications outsourcing services. SAIC also

continued to expand its outsourcing services for ScottishPower in Europe. In addition, SAIC was awarded

a new contract to provide IT infrastructure outsourcing services to the Superior Court of San Diego

County.

Global Network Transformation. SAIC designed and deployed a global virtual private backbone IP

network for one of the largest chemical manufacturers in the world. An independent consultant conducted

an assessment of SAIC’s solution and validated a significant savings for this UK-based chemical

manufacturer.

Going the Extra Mile. In 2006, SAIC received an excellence award from Kalido, an industry leader

in commercial data warehousing and master data management solutions. SAIC was recognized for

delivering a Kalido-based data management solution to a major oil and gas client that established a unified

data governance process that improved data quality and realized savings in excess of $6 million.

Commercializing Technology. SAIC has successfully commercialized a laser-based technology

that it initially developed for use in the government sector. The Virtual Environment Capture System rapidly

creates 3-D virtual representations of indoor and outdoor spaces. It can capture a typical office in detail in

less than five minutes. ASE Inc., a custom software development company, has licensed this technology.

(Below) SAIC has a long-term relationship with Entergy, providing a wide range

of IT services from centers in New Orleans, Little Rock and Houston. SAIC

employees working at the Entergy data center in New Orleans are, front to

back, Melvin Staes, Donna Maldonado, Andre Dejoie, Brenda Westberry,

Phil Celestin, Rajiv Ramrakhiani and Randy Ott. (Above) Ronnie Laurent is a

technical operations coordinator at the Entergy data center.

Team SAIC

“Our heritage as a customer-focused, ethical company is at the heart
of it all. That heritage includes a commitment to ethical performance
and a commitment to being a company where the entrepreneurial spirit
flourishes with accountability. Both of these things are elements of our
culture of ownership. It is a culture of pride and responsibility.”

Ken Dahlberg

CEO and Chairman of the Board

Innovation, ethical performance, superior customer service and the desire to do work that matters are the

fundamental principles that have marked SAIC since its founding in 1969.

Imbued with an entrepreneurial spirit from the start, SAIC relies on the creativity and passion of its

employees to help customers solve their toughest problems. SAIC employees are empowered to deliver

outstanding value and productivity, and to go the extra mile for their customers.

SAIC’s entrepreneurial spirit is seen in the 9,000-plus contracts it has in effect today and in the way

it successfully grows many of them. This growth – from acorns to oaks – is a reflection of SAIC’s historic

bottom-up approach to entrepreneurship that remains a foundation of the company’s success.

SAIC takes pride in having highly skilled and talented employees working on nationally significant

programs and cutting-edge research. Diversity of thought, background and experience enhances the

creativity and innovation of the mission-critical solutions SAIC provides to its customers. In today’s

increasingly global marketplace, SAIC recognizes that its long-term success depends on a commitment to

attracting, retaining and developing the best and brightest individuals from the world’s diverse talent pool.

To cite just one example of this commitment, SAIC has once again been named a number one

employment choice of candidates with cleared national security backgrounds, according to an annual

survey conducted by IntelligenceCareers.com and its publication, Defense Systems and Intelligence

Careers Magazine.

Each year, IntelligenceCareers.com polls cleared individuals as to where they would most like to work,

and SAIC has been the top mention since 2003.

All challenges – from defense solutions to space exploration to cancer research – are finally solved by

people.

At SAIC, we put our people first.

(Above) Jessica Baer, a senior research technician with SAIC-Frederick’s Lab-
oratory of Molecular Technology, analyzes the activity of cancer genes using

DNA microarrays, or gene chips. (Center) Miguel Saavedra is a senior software

engineer at SAIC’s Orlando office, which supports key simulation projects such

as the U.S. Army Warfighter’s Simulation. (Below) SAIC’s Rajiv Ramrakhiani is

a UNIX administrator at the Entergy data center in New Orleans.

Life@SAIC is a feature on ISSAIC, SAIC’s intranet, that taps into the authentic voice of employees writing about what

working at SAIC means to them. The feature is entirely voluntary and only lightly edited for style and clarity. Employees

answer a few simple questions to build their Life@SAIC profile. Those questions include:

In your own words, what do you do at SAIC? What is the most satisfying thing about your job? Other questions

are optional, including: What advice would you give someone starting out in your field?

A new profile is featured each weekday on the ISSAIC home page. As the number of profiles grows, it will become

an increasingly useful tool in allowing new colleagues and teammates to get a more rounded glimpse of the people

with whom they will be working.

The profiles received more than 160,000 page views between November 2006, when the feature was launched,

and March 2007. Here are some of the things employees say about their work.

“The most satisfying thing about my job is knowing at the end

of the day that I have been able to make a positive difference

in our contract performance and to have a lasting effect on the

people around me.”

Renae Bowman

Project Control Analyst V, Huntsville, Ala.

“Everything I do is for the benefit of the men and women serving in the

armed forces and fighting the global war on terror. Knowing that I can

make things better for them is my supreme motivator.”

Mike Heckenberger

Senior C4ISR Analyst, Suffolk, Va.

“The best thing about my job is working with talented

engineers from all over the country and the world on

things that improve life on earth.”

Juan Manuel Traslavina

Senior Software Engineer, Houston, Texas

“The tsunami killed over a quarter of a million people near the

Indian Ocean coastline. Now, the work of my team can prevent

similar casualties in the future. We make this world a safer

place! It’s an incredible feeling when you really think about it.”

Undersea Surveillance Program Manager, San Diego, Calif.

Jimmy Thai

“I truly enjoy working with a team that is focused on a mission.

We know that the work we do daily and our final products play

a role in a much larger mission that helps our country.”

Marianne Floyd

Senior Systems Integrator, Reston, Va.

“Many times we start from scratch – a blank piece of paper – and we listen to

our customers, their needs and challenges. We build a system to help them

improve their job, to solve their mission to fill a critical void. It is the most

satisfying reward to see something you built improving someone else’s life.”

Vice President, Division Manager, Warrenton, Va.

Shawn Nicole Purvis

“Our team comprises motivated, intelligent individuals who have excelled as a group.

We have continually received high marks from our customer and our funding source for

our execution. Each one of the capabilities is unique in one aspect or another, and as a

result there is always another challenge just around the corner for myself and the team,

which makes every day interesting but we don’t let anything stop us. We do the research,

consider the options, make the call and move forward.”

Laury Decker

Program Manager, Albuquerque, N.M.

“The most satisfying thing about my job is knowing that I

contributed in the production and assemblies of systems

integration of computer processing and auxiliary equipment

racks for use on various DoD U.S. Navy systems.”

Ernesto Roberto

Technician, San Diego, Calif.

Board of Directors

K.C. Dahlberg
CEO and Chairman of the
Board

W.H. Demisch
Financial Consultant

J.A. Drummond
Vice Chairman, BellSouth
Corp. (Ret.)

J.J. Hamre
CEO and President, Center
for Strategic & International
Studies

A.T. Young
Executive Vice President,
Lockheed Martin Corp. (Ret.)
Lead Director

A.K. Jones
University Professor,
Computer Sciences,
University of Virginia

H.M.J. Kraemer, Jr.
Former Chairman, President
and Chief Executive Officer,
Baxter International, Inc.

E.J. Sanderson, Jr.
Retired Oracle Corporation
Executive

L.A. Simpson
President and CEO of Capital
Operations, GEICO Corp.

J.P. Walkush
Executive Vice President,
SAIC

As of January 31, 2007, the Board of Directors of the Company consisted of the directors pictured above.

Retired U.S. Air Force Gen. John P. Jumper and Dr. Miriam (Mim) John, retired vice president of Sandia

National Laboratories’ California division, were appointed to fill vacancies on the SAIC Board of Directors,

effective June 8, 2007.

Stockholder Services

Questions concerning accounts for registered shareholders and other stock matters

– including name or address changes, stock transfers, option exercises or other

services – should be directed to SAIC’s stock plan administrator and transfer agent:

Mellon Investor Services

U.S. telephone: 866-400-SAIC

International telephone: 201-680-6625

www.melloninvestor.com

Stockholder Relations

Questions from stockholders, analysts and others can be directed to:

Stuart Davis, Senior Vice President, Investor Relations

SAIC

1710 SAIC Drive MS 1-14-1

McLean, VA 22102

Telephone: 703-676-2283

Fax: 703-676-6344

E-mail: stuart.davis@saic.com

Annual Report and Form 10-K

The SAIC 2007 Annual Report is available from the SAIC Web site at www.saic.com.

An Adobe Acrobat Portable Document Format (PDF) can be downloaded from this

location. The SAIC 10-K can also be found at this location.

SAIC on the Internet

Information on SAIC’s services and capabilities can be found at the SAIC home page

on the Internet (www.saic.com). Financial results, corporate news releases and other

SAIC activities can also be found at this Internet address.

Independent Registered Public Accounting Firm

Deloitte & Touche LLP

San Diego, California

Produced by SAIC Communications and Corporate Creative Services

Statements in this Annual Report other than historical data and information may constitute forward-looking statements that involve risks and
uncertainties. A number of factors could cause our actual results, performance, or achievements or industry results to be very different from
the results, performance or achievements expressed or implied by such forward-looking statements. Some of these factors include, but are
not limited to, the risk factors set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2007, and in such
other filings that the Company makes with the SEC from time to time. Due to such uncertainties and risks, readers are cautioned not to place
undue reliance on such forward-looking statements, which speak only as of the date hereof.