New Integral Chief Brings Ground-Up Experience to the Job

Pete Gaffney

Chief Executive Officer, Integral Systems

In the 20 years he has spent with Lanham, Md.-based Integral Systems, Chief Executive Officer Pete Gaffney has held just about every job one can hold in a satellite ground systems company.

Gaffney started as a hardware engineer on a satellite simulator program, and worked on a few similar projects before moving into the command and control arena. He was the company’s program manager during Integral’s first projects with Loral Skynet, supervising work on the ground system that the company built for the Telstar 5 satellite. Gaffney also served as the company’s vice president for commercial ground systems, and briefly led Integral’s government division before filling the position of chief executive officer.

Gaffney, who was appointed in April, took over Integral Systems at a critical time in the company’s history when it was experiencing success, and turmoil.

Though the company achieved many financial successes during 2006, the year also saw the resignation of its chief executive officer, Steven Chamberlain, who pleaded guilty to sexual offense charges involving a minor and left his post in April. Shareholder discontent over governance issues, Chamberlain and a desire to move forward with a sale also plagued the company during the year’s early months, but Gaffney said that those concerns have been quieted, and that Integral hopes to close the year on a high note. An announcement of a sale or other strategic maneuver could come any day, as Gaffney is predicting a deal solidified in the fall.

Gaffney recently spoke about these issues and the company’s future with Space News staff writer Missy Frederick.

How are things progressing with the sale of the company or similar venture?

We’re on track on our efforts to explore strategic options for the company. I still believe that we will have an announcement this fall. Things are going well with that, but I can’t give any more details.

What do you see as the major growth areas for the company?

I definitely think that the major growth will come from the government side of the business, and the Defense Department . We have quite a few opportunities coming up there — we are trying to get the ground system of the Space Based Space Surveillance Contract.

We’re also teamed with Northrop Grumman on GPS 3. We’re hoping to win the ground contract for Rapid Attack Identification Reporting System (RAIDRS) Spiral 2; we were the prime on RAIDRS Spiral 1. That’s slated for the 2009 time frame. In general, the programs in government are just far larger than the commercial contracts we do.

Do you have any specific strategies in mind for generating more government business?

We think there is actually a good opportunity to have our Command and Control System Consolidated (CCS-C) standardized as the control system used by the Air Force. The CCS-C program has been extremely successful and on budget. It is for use on the Advanced Extremely High Frequency, Milstar and Wideband Gap Filler satellites, and we hope that the military will transfer its other communications satellites onto it.

It makes all the sense in the world to do it. The Air Force well over a decade ago commissioned a study to develop a standardized satellite control ground system, and never did pursue it to its conclusion. Maybe the timing just wasn’t right for that, but we think that with the success of CCS-C and its use on upcoming programs, the timing is right.

What is your split between government and commercial business? Has there been major change there, and what do you predict for the future?

There has been dramatic change. At one time in the late ’90s, it was about a 50/50 split. Now 80 percent of our business is government, and 20 percent is commercial.

That big change occurred when we won a couple of large Air Force contracts, such as CCS-C and RAIDRS. It will probably continue to grow on the government side. We do see growth in our commercial business, but just not anywhere near the magnitude of the growth we anticipate in the government business.

Where has your work been concentrated in the commercial sector?

We have just about every satellite operator in the world as our customer. This includes larger ones such as PanAmSat, Loral Skynet, EchoS tar and Sirius. We deal with the foreign companies as well. Some of our newer customers include the Vietnamese Vinasat, and we just received a contract for AsiaSat 5.

Integral Systems had a tough year in terms of the exit of chief executive officer Stephen Chamberlain and concerns from shareholders over governance? What have you done to quell remaining concerns at this point?

I think things have smoothed out for us. We’re not getting the kind of adverse press coverage that we did before. But even despite some of those issues, we had a record-setting year. We had a couple of quarters where we set records, and had to increase our guidance a couple of times. Really it’s been a huge tribute to our management team and to the employees of Integral Systems that we’ve stayed focused and kept producing.

Have you noticed more satisfaction from shareholders since the appointment of one of their own — Bill Leimkuhler — to Integral’s board of directors?

It is working out very well. Bill, I think, was a great addition to our board. I think the important thing for our shareholders was that they wanted to see us keep our promise to explore strategic alternatives to maximize shareholder value, and we’re doing just that.

How successful has the Lumistar acquisition been for your company? Do you see any more acquisitions in the company’s future?

Lumistar is doing great. It’s a very profitable company, and it has contributed to our earnings every quarter. It’s a slightly different market — aircraft testing and missile telemetry processing — but it’s proven to be a very complimentary addition. We’ve actually put our acquisition strategy on hold for the moment, on account of the company’s pending strategic options.

Since taking over as chief executive officer, what changes do you want to make for the company, going forward?

Really, my focus has been working through the strategic alternatives we’re exploring. But from what I’ve seen even with the companies we’ve been speaking to about that, there are a lot of opportunities to get into other areas.

Certainly the classified market is one of these areas. This is a very difficult market to crack into. We’ve got some business right now, and we’re teamed with another major company pursuing a classified contract that may be given out this year.

But that’s probably the biggest area where we could use some help. We certainly have the products, services and capabilities to support the classified market, but there are other challenges in areas such as obtaining clearances.

What are your goals for your first
year as chief executive officer, and then looking into the future?

For the first year, I want to improve operating efficiencies and bring about a better financial awareness among all program managers to help this happen.

I think we’ve done a fairly good job with this and are already on our way. In the future, I’d like to see the company continue to pursue its business model of bringing a commercial way of doing business to government programs, driving down acquisition costs and bringing our product-based solutions to the government.

There’s been a mixed reception from the government for this, but it is my belief that the government will transition more to the commercial way of doing business because their budgets are being squeezed.

What are some recent trends in terms of ground system acquisitions and technology?

The trend we’ve seen on the Air Force side is to separate the ground system from the satellite contract. This plays right into our strength, as we like bidding as a prime contractor.