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Could top out at $10 billion

Titan Corp. part of group awarded huge security contract

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Accenture Ltd. (NYSE: ACN) led a group that won a 10-year contract worth up to $10 billion to develop a system for tracking visitors to the United States, the Department of Homeland Security said.

San Diego-based Titan Corp. (NYSE: TTN), SRA International Inc. (NYSE: SRX) and Raytheon Co. (NYSE: RTN) will be the main subcontractors in Accenture's group.

Accenture's group beat out offers by Computer Sciences Corp. (NYSE: CSC) and Lockheed Martin Corp. (NYSE: LMT). Shares of Hamilton, Bermuda-based Accenture rose as much as 4.9 percent. Computer Sciences and Lockheed Martin declined.

The contract will probably be the largest awarded for information technology this year, William Loomis, an analyst at Legg Mason Wood Walker, said in a report. The group will help implement a security program to collect and share data on foreigners entering the U.S. as part of the U.S.-Visit program to protect against terrorism, the department said.

"Accenture will have to share with the others in the contract, but it's still a big positive," said Cindy Shaw, an analyst at Schwab SoundView Capital in San Francisco, who rates the shares "outperform" and says she doesn't own them.

Accenture plans to use radio frequency identification, or RFID, technology to place a microchip containing a person's fingerprints, photograph and other information in their U.S. visa, said Eric Stange, managing partner of Accenture's defense and homeland security practice. A file will be created and shared between government departments on every visitor to the United States.

Sept. 11 reaction

Homeland Security is developing the system to prevent a terrorist attack similar to that of Sept. 11. A government investigation has focused on the lack of communication between the Central Intelligence Agency and the Federal Bureau of Investigation for not identifying the hijackers before the assault.

The contract is valued at between $10 million and $10 billion, the department said. It was awarded for five years with five one-year options to extend. Accenture will receive about $72 million in the first year, James Williams, director of the US-Visit program said.

"The award to Accenture is a validation of the company's evangelism on RFID technology," said Tony Ursillo, an analyst in Boston at Loomis Sayles & Co., which has $54 billion under management including Accenture shares.

Shares rise

Shares of Accenture rose 75 cents to close at $25.36, after earlier touching $25.82. The contract will add as much as 5 cents a share to the company's earnings, said David Garrity, director of research at Caris & Co. in New York.

Shares of Titan gained 16 cents to $19.05. Fairfax, Va.-based SRA rose $3.03 to $41.80 and Raytheon rose 1 cent to $33.26.

El Segundo, Calif-based Computer Sciences fell 41 cents to $43.18. Bethesda, Md.-based Lockheed fell 43 cents to $49.11. Shares of SI International Inc. (Nasdaq: SINT), which lodged a bid with Lockheed Martin, fell $2.25 to $22.05.

Shares of the companies involved in the bidding began moving before the announcement amid speculation Accenture's group had won.

Closely held

Homeland Security Undersecretary of Border and Transportation Security Asa Hutchinson said he had no reason to believe the information was divulged early. Hutchinson said he personally informed the companies involved via telephone Monday at about 9 a.m.

"This was very closely held and handled with a great deal of integrity," he said at a press conference.

Computer Sciences spokesman Rich Venn said he had no comment. Lockheed Martin spokesman Thomas Greer declined to comment.

Accenture will be the "prime integrator" for US-Visit, or U.S. Visitor and Immigrant Status Indicator Technology. The program will create a system to link about 20 government databases. It will collect information on when visitors enter the United States, their movements in the country and when they leave.

US-Visit began at 115 airports and 14 seaports on Jan. 5, requiring foreigners have their fingerprints scanned and photographs taken. The program will be expanded to the 50 busiest land border crossings by the end of this year.

Chip embedded

Accenture's program will link each person with the information embedded in their visa.

"When they present themselves at the airport, they can scan the passport and put their finger on a scanner that will verify that the holder of the passport is the person who is standing in front of you," Accenture's Stange said.

"People were surprised that Accenture got the bid because they are headquartered in Bermuda," Caris & Co.'s Garrity said. He said he doesn't own shares in the companies involved. "If you were going to get a large government contract like US-Visit, how could it go to a non-US domiciled company?"

Representative Lloyd Doggett, a Texas Democrat, and Sen. Olympia Snowe, a Maine Republican, said they were concerned that a company exempt from U.S taxes won the contract.

"Our security is undermined by corporations that devise ways to avoid paying their share of the cost of keeping our homeland secure," Doggett said in a statement.

The department saw no conflict in awarding the contract to a Bermuda-based company, Hutchinson said. Accenture LLP is a unit based in Virginia, he said.

"Legal counsel looked at this and determined that all three bidders met all the legal requirements," Hutchinson said.

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Related Article:

Titan earnings fall 56 percent on merger charges (May 3, 2004)

Related Link:

Titan: http://www.titan.com/

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