SAN DIEGO -- Shareholders of Science Applications International Corp. on Wednesday approved a restructuring plan that clears the way for one of the nation's largest employee-owned companies to sell stock to the public.

The defense contractor said this month that it planned the initial public offering in mid- or late October, subject to the shareholder approval. Last year, it disclosed plans to raise up to $1.73 billion in the IPO.

"We are here to start a new phase in our company's history," Kenneth Dahlberg, SAIC chairman and chief executive, declared at the end of a shareholder meeting in McLean, Va., that lasted less than a half-hour.

Shareholders representing 86 percent of the voting power agreed to convert existing shares into preferred shares that would control the San Diego-based company. SAIC will also create a class of common shares, listed on the New York Stock Exchange under the symbol SAI. Only the common shares would be publicly traded.

The IPO marks a seismic cultural shift for the secretive contractor, which has been profitable each of its 37 years and performs some of the U.S. government's most sensitive security work. Robert Beyster, the company founder who retired in 2004, made employee ownership his most sacred management principle.

Under Beyster, SAIC was highly decentralized and difficult for many outsiders to understand. Business units competed against one another for the same contract, and their work overlapped.

"It is the most balkanized, compartmentalized major defense company in the nation," said Loren Thompson, chief operating officer of the Lexington Institute, a think thank in Arlington, Va. "SAIC has such a peculiar business model that it probably was inevitable there would be confusion about the true valuation if they ever came to market."

Dahlberg, who joined the company in 2003 from General Dynamics Corp., reiterated Wednesday that SAIC was going public because it wanted to stop bleeding cash to buy stock. SAIC spent $2.4 billion in the last five years to purchase stock from employees, who can buy and sell shares once every three months at a price determined by a company auditor.

Employees have wanted to sell more than buy, prompting SAIC to purchase shares from its workers in what is an otherwise illiquid market.

SAIC, which has more than 43,000 employees, continues to post strong financial results, earning $927 million on revenue of $7.79 billion in its fiscal year ended Jan. 31.

It has also suffered setbacks, including harsh criticism for its handling of computer overhaul for the FBI and a contract dispute with the Greek government to install a security system for the 2004 Olympic Games. The company initially planned the IPO early this year, but said that it delayed the sale to settle differences with the Greek government.