Arms trade - War brings $1 billion, rescues Raytheon

9 Jun 1999

1) From MoJo on US Arms Sales Around the World

Raytheon: Primary military product: Missiles, missiles, and more missiles

Annual sales: $20.5 billion

Primary customers: Everyone

Famous/infamous for: Profiting from the Gulf War -- even though their systems didn't work nearly as well as the Pentagon said they did

Major campaign contributions (1997-98): $610,708 from Raytheon and related PACs

Perhaps more than any other arms merchant, today's Raytheon is a creation of the Gulf War. During U.S. v. Saddam round one, everyone suddenly wanted Raytheon's Patriot missile-defense system -- even though the Pentagon, during the war, vastly overstated the Patriot's effectiveness.

2) "There's no business like WAR BUSINESS!!"

Forwarded Message from Peace and Justice Works

Boston Globe6/4

Raytheon sees $1b in orders - CEO cites depleted missile stocks due to Serbia war, mulls Quincy plant closing

By Ross Kerber, Globe Staff, 06/04/99

Raytheon Co. expects to receive about $1 billion in orders to replenish stocks of cruise missiles and other weapons fired during the air war against Serbia, the company's chief executive said yesterday.

Lexington-based Raytheon is also considering selling or closing a Quincy electronics plant that employs about 500 people, said CEO Daniel Burnham, and should announce a decision soon.

Burnham made the remarks to reporters after giving a breakfast speech at the Ritz-Carlton hotel. The country's third-largest defense contractor, Raytheon supplies weapons like the Navy's Tomahawk cruise missile and glider bombs used by the Air Force. Until yesterday it hadn't quantified how much revenue it anticipates from the air war.

Observers estimate NATO forces have used hundreds of Tomahawks to blast targets in the Balkans. Another Raytheon system in use is a missile decoy device known as the ALE-50, towed behind B-1 bombers and F-16 fighter jets. The pods send out electronic signals to distract enemy missiles.

The Air Force does not discuss its use of the disposable decoy or its cost, but Aviation Week recently reported that B-1s using the decoys have avoided harm from 30 Serb missiles fired at them. An Air Force spokesman declined to discuss the report.

Altogether, a Raytheon spokesman said, the company expects to receive $1 billion in orders within the next year, and it expects to fulfill those orders over the next three years. ''We are beginning now to get approvals'' from the Pentagon, Burnham said.

The figure doesn't include new orders Raytheon might receive from other NATO countries it supplies such as Britain and Spain, Burnham said. In addition to new bombs and missiles, some of the work will include the refurbishment of older Tomahawks with satellite-guidance mechanisms to make them more accurate. So far the US military has allocated $424 million to upgrade 626 older Tomahawks.

S.G. Cowen & Co. analyst Cai von Rumohr said the forecast was in line with expectations for Raytheon and that the campaign against Kosovo would likely boost overall US defense spending next year as well. That should help rivals like Boeing Co. and Lockheed Martin Corp. as well.

Burnham also said the company is still reviewing options for its microelectronics plant in Quincy, which produces components for the Patriot defense missile and for ground-based radar systems.

While the company has no immediate plans to shut the plant, he said, Raytheon is ''examining all options'' including a possible sale.

In his talk, sponsored by Northeastern University, and in wide-ranging comments afterward, Burnham described his efforts to reshape Raytheon to take advantage of technological changes and to emphasize customer service.

Since being named Raytheon's chief executive last year, Burnham has tried to decentralize the sprawling institution and to make it more efficient through layoffs and reorganizations.

Some of those efforts should help Raytheon save about $1.2 billion in 2001, Burnham said, and help the company win more US and foreign military orders. He also said Raytheon expected higher profits from civilian projects such as dam-building, which together generated about 25 percent of Raytheon's revenue of $19.5 billion last year.

In other matters, Burnham said he was encouraged by a US Navy decision to give Raytheon a $140 million contract to build a prototype radar system, making it the likely supplier of the full shipboard radar system as well.

Burnham declined to discuss how much Raytheon might earn from such contracts, which analysts estimate to be worth billions.

He also declined to discuss reports in British newspapers that officials have selected Raytheon to build a major system known as the Airborne Stand-Off Radar, or ASTOR.

Burnham said the company has heard no decision from British authorities and doesn't know when it might. Should Raytheon win, Burnham said, the project work would serve as the basis for a new surveillance business unit to be based in the United Kingdom.

Raytheon's widely traded class B shares rose 1/2 to 701/8 on the New York Stock Exchange.

This story ran on page E1 of the Boston Globe on 06/04/99. c [2]Copyright 1999 Globe Newspaper Company.

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