No. 2: Boeing's IDS unit soars

Boeing Co.'s problems with its aircraft businesshaven't been a drag on its IntegratedDefense Systems group.The group, which includes Boeing's informationtechnology and systems integrationbusiness, lands at No. 2 on the 2008 Top100 with $9.7 billion in prime contractingrevenue.With 72,000 employees worldwide, IDSdoes most of its big money work for theDefense Department. It develops advancedweapon, intelligence and surveillance systems,communications architectures, andlarge-scale integration projects. This pastyear, IDS also netted some big wins in thecivilian arena, including a$695 million deal todesign and manufacturecommunications satellitesand upgrade satelliteground facilities forNASA. This contractcould be worth as much as$1.2 billion if all optionsare exercised.Boeing will develop thenext generation of NASA's Tracking andData Relay Satellites (TDRS), a satellite linethe company has previously worked on. TheNASA contract obligates Boeing to delivertwo satellites, bringing the company's overallsatellite backlog to 27. The first of thepair, the TDRS-K, will be ready for launchin 2012, while its twin, TDRS-L, shouldlaunch in 2013.Any clouds darkening Boeing's financialhorizons are likely to be political. AnalystPaul Nisbet, president of JSA Research, ofNewport, R.I., said the presidential electioncould reshape the defense contracting landscape.That could be problematic for some ofthe company's government work, notably inmissile development and the still-controversialFuture Combat Systems program, anArmy modernization effort designed tolink soldiers to a widerange of weapons, sensorsand information systemsvia a mobile networkarchitecture.Boeing is still smartingfrom its loss to Airbus on a contract todesign and build a next-generation tankeraircraft for the Air Force.The company is protesting the $35 billionAir Force award to the Airbus parent,European Aeronautic Defence and SpaceCompany, and its U.S.partner, NorthropGrumman."There are quite a fewifs, but we still recommendthe stock," Nisbetsaid."You can't ignore thefact they have 5 1/2 yearsof production in thepipeline. It's a quarter ofa trillion dollars' worth."Although Boeing's military sales arestrong, they are shrinking compared to thecommercial side.Through 2012, Nisbet estimates a 1 percentdecline per year for the defense businesscompared to an annual 8 percentincrease in commercial sales. Overall,Boeing's revenue in 2007 was $66.4 billion,of which $32.1 billion came from the IDSgroup. The group includes Network andSpace Systems, with $11.7 billion in revenue,and Support Systems, with $6.7 billion inrevenue.Given its overall market strength, Boeingdoesn't expect an especially rough ride.Looking at the company's range and breadthof programs, "we think we can withstandturbulence in our marketspace," said JeffTrauberman, vice president of businessdevelopment at Boeing's Network and SpaceSystems unit, an element of IDS. "We havean energized leadership and management.We have a diversity of customers. And wehave people we can deploy from one programto another."One high-visibility program for whichBoeing is the prime contractor is the surveillancesystem known as SBInet, which isintended to monitor and safeguard theUnited States border with Mexico. The companywon a $64 million task order inDecember to develop the first phase of thevirtual fence project. It includes developmentof a common operating picture thatwould provide a comprehensive view of fieldoperations in near-real time.Although the project has been a source ofcontroversy, the company has completed thefirst prototype section on a 28-mile stretchof the border between Arizona and Mexico.The Homeland Security Department recentlyannounced it was rebuilding the sectioninto a permanent installation of towers andsurveillance systems.