Proving to be a positive addition.

Proving to be a positive addition

It's hard to describe the business that William R. Hoover has built into a billion-dollar corporation because his company's line of work doesn't fall neatly into one of those traditional industrial categories like "banking" or "automobile manufacturing."

Hoover is chairman of El Segundo-based Computer Sciences Corp., which specializes in a service called "systems integration." In simplest terms, systems integration means making sure that all of the computers and software programs used by a company or a government agency work together harmoniously.

When the U.S. Customs Service wants to send computerized information to its Washington, D.C., headquarters about the volume of goods passing through the Port of Los Angeles, for example, it sends the data on a network designed and installed by Computer Sciences Corp.

Among other networks Computer Sciences Corp. has designed is a system that maintains credit information files on 110 million people in the United States. Another system processes the health insurance claims of coal miners for the U.S. Department of Labor's black lung program, and yet another processes claims for the federal government's National Flood Insurance Program.

Systems integration is becoming one of the most essential and specialized functions in the business world because of a simple fact of high-tech life: Whenever two or more computers join together, the possibilities for failure are unlimited.

Anyone who has ever tried to connect two dissimilar brands of computers knows what a mess the result can be.

Multiply that by all the separate brands and models of computers on the market, the thousands of software programs available, and the thousands of ways of organizations want to use them, and you have an idea of the immense possibilities for high-tech disaster.

To avoid such technological messes, corporations and government agencies hire systems integration specialists like Computer Sciences Corp. to design and install their systems, hoping thereby to ensure that all parts of a system will work in concert.

Designing and installing such systems has grown into such a large specialty within the computer industry that Computer Sciences, founded in 1959 in an office near Hollywood Park, is now a New York Stock Exchange-listed company with more than 18,000 employees. Among Los Angeles-based public companies, Computer Sciences Corp. ranked 33rd in revenues in a recent Los Angeles Business Journal survey.

Much of that growth has been orchestrated by Hoover, a former mathematician at the Jet Propulsion Laboratory in Pasadena who became Computer Sciences chairman in 1972.

Having just one company coordinate the design of a computer system might seem like mere logic and common sense, but Hoover explains that corporations and government agencies in past years often assigned the design of different parts of the systems to different companies. The results of these piecemeal approaches were often systems that didn't work or cost more to correct than they did to install.

Hoover says the federal government to a large extent has recognized the error of its ways and "has led the way" in turning to one central contractor to design and install a system.

Interviewed in his understated office at the company's six-story steel and glass headquarters in a landscaped El Segundo industrial park, Hoover exhibits the precise, logical manner that might be expected of a mathematician. He answers questions directly and succinctly, quoting figures to support his statements instead of relying on the smoke-screen of hype that often surrounds chief executives.

If some of Hoover's remarks are any indication, hype is something that annoys or at least amuses him. In a speech to a management conference in March, for example, he said all the brochures written by systems integration companies describing themselves as leaders in the field suggested that the industry is "either in the midst of an unprecedented boom or a faddish period of marketing hype."

Hoover's concluded, however, that "The boom is real" in terms of governmental contracts, and he says the market for private-sector contracts is building steadily.

Computer Sciences Corp. already has landed a fat share of government business, with several billion dollars' worth of such contracts on its books. Over the past three years the company has landed more than 14 government contracts each worth $100 million or more -- in addition to numerous smaller government and corporate contracts.

Financial analysts who track the company give Hoover high marks for snagging those contracts.

One of them, Bahar Gidwani of the New York office of Kidder Peabody & Co. securities, says the company has "quite a lot of this year's and next year's revenues already in the bag" because of the government contracts.

But Gidwani and Stephen T. McClellan, an analyst with Merrill Lynch Research in New York, both say Hoover may be proceeding too cautiously in the company's announced strategy of gaining more corporate contracts by acquiring companies that already have corporate business.

"Hoover is naturally cautious, which is good, but you could fault him for being too cautious" in his acquisitions, Gidwani says.

McClellan says the CSC chairman has been "very choosy, very careful, and very tight with the purse strings." He adds, "If there's a weakness, it could be that they don't have a bigger stake in the (corporate) end of the business."

Hoover's strategy is to build the corporate business so Computer Sciences doesn't rely so much on government contracts, and he sees the private sector as a potential source of substantial new revenues.

For the year that just ended, for example, government contracts accounted for 72 percent of CSC's revenues compared to 75 percent the year before. During the same time, corporate contracts rose to represent 20 percent of the company's revenues vs. the previous year's 18 percent.

Analysts say the trend is a good sign, but they say Hoover should be moving faster toward his announced goal of building the private sector side of the business by acquiring companies already in that business.

Hoover says the company has demonstrated that it is moving in that direction, pointing out that CSC is in the third year of a five-year plan that calls for it to derive 40 percent of its revenues from corporate contracts by 1991.

Regarding the speed at which the company is moving to expand its corporate contract business, he says, "While we cannot predict with certainty the timing of acquisitions to any given year, we are confident we will achieve our five-year goal" of spending $200 million on acquisitions to build the corporate business.

Hoover spoke about that intention to win more corporate contracts during a ceremony in May when the company unveiled a new logo designed to reflect that Computer Sciences "seeks the same leadership role in the private sector that it holds in the federal arena."

Hoover is generally reluctant to comment about himself, but regarding his own leadership role he says he didn't set out to build a career in management.

"I didn't come here to be president of the company, I came here because of my interest in the technical operations," he says. Even today, he says, he doesn't think of himself as powerful.

"I don't think of my position as one of power," he says. "I think of it more as one of providing leadership to people who are competent in every respect."

Gidwani, who has written a number of research reports on the company, says he is generally upbeat about the job Hoover has done and the company's financial performance. He points to CSC's 35 percent increase in profits, which rose to $43.5 million for the just-completed year vs. $32.2 million the year before. Revenues at the same time rose only 12 percent, meaning Hoover squeezed a lot more profit out of a relatively modest sales gain.

Gidwani says he recommends CSC stock, which was trading near $48 last week and is one of 500 that make up the Standard & Poor's Index.

Gidwani also praises Hoover's decision recently to sell off 30 percent of a world-wide telecommunications and computer data transmission network called Infonet that Computer Sciences operates. CSC sold 15 percent of Infonet to the French national telecommunications company and 15 percent to the German national telecommunications network, both of which will likely bring in quite a few new customers for CSC, Gidwani says.