Early prep helps Boeing weather downturn

Boeing Co. looked ahead in 2012 to avoid this year's fiscal storms by restructuring and reinvesting savings to build its cyber and command and control businesses and as a result it solidified its Top 100 ranking.

Like the radar in its jetliners, the Boeing Co. spent much of 2012 looking ahead in hopes of avoiding the gathering federal fiscal storms, including the threat of sequestration.

The result? Last year was a very good year, said Dewey R. Houck II. “It culminated in the combination of two businesses into a very strong division” and some news sales territories.

The deputy general manager of Electronic and Information Solutions at Boeing Network and Space Systems said the merger of Houck’s Information Solutions unit and the Electronic and Missions Systems group, which includes the Intelligence Systems Group and Cyber and Security Solutions, created a complementary organization and a strong presence in the command, control, communications, computers, intelligence, surveillance and reconnaissance (C4ISR) defense market.

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The merger has created a unified business perspective, Houck said, and is “really beginning to start to gel as a team.”

“We were not so worried about ’12 because [we] know pretty much a year in advance what it’s going to look like,” he said.

Also, in 2012, three major federal contracts that were scheduled to be recompeted were instead extended by the clients, Houck said. But he could not provide more details because of the nondisclosure terms of the awards.

“For ’13 we’re making sure that we have the right amount of orders to make sure that we continue on the same revenue and earnings trajectory that we’re on,” he said.

As a result, the Chicago-based defense giant landed in the No. 3 spot for 2013 with $7.1 billion in prime contracts.

The new division has its sights set on a bigger footprint in intelligence, surveillance and reconnaissance (ISR) programs, communications as well as internal sales to the company’s military aircraft programs and other defense components, Houck said.

And because its internally managed network is one of the largest in the world and is well-versed in spotting and thwarting cyber threats, Boeing plans to market its expertise to U.S. government and private sector clients in partnership with some commercial cyber companies, such as Narus, a Silicon Valley company Boeing purchased in 2010, Houck said.

“We’ve had some success internationally in that area as well,” notably in Canada and Japan, he said. Boeing intends to “put more of an emphasis on taking the capabilities that we have international, especially in C4ISR and cyber.”
In June 2012, the Sojitz Corp., a global trading company in Tokyo, entered into Boeing's first international cybersecurity agreement for advanced network assessment expertise. The value of agreement – which underscored the company's commitment to growing its cybersecurity business in Asia – was not disclosed.

Facing what Houck acknowledges as “clearly one of the most austere budget times that we’ve been in,” Boeing is simultaneously eying investments in technology, training and potential acquisitions that will expand its national defense offerings.

He credits the foresight of Dennis Muillenburg, executive vice president and CEO of Boeing’s Defense, Space and Security business, who in 2010 warned that the cyclical nature of government contracting was trending downward.

According to Houck, Muillenburg said the company would examine all of its business “and figure out how we’re going to save money.” And while “others might be hunkering down,” Boeing would put those savings back into the business.

“Since 2010 we’ve taken $2 billion out of the equation,” Houck said, allowing Boeing to continue to invest in its prime business areas.

Houck said he believes Boeing is “on very strong footing to go into 2014,” singling out among Boeing’s strengths situational awareness and advanced analytics, which will continue to be in great demand in the federal sector.

The sequestration of 2013 notwithstanding, “I think we’re in very good shape to make our plan,” Houck said. “The reason for this is we were very circumspect when we put the plan together and realistic about what we were going to have to do.”

But he quickly added, “I think 2014 may be more challenging.”