Lockheed Martin Corp.

P> Total Contracts $1,172,152,000

Corporate Headquarters: Bethesda, Md.


Lockheed Martin Corp., the leviathan of defense companies, expects revenue to top $30 billion by the end of 1996.

Its vast size and extended technological skills will allow it to dominate the defense sector and grab an ever-larger share of the federal infotech budget. After gobbling up Loral Corp. for $9.1 billion, Bethesda, Md.-based Lockheed Martin projects infotech revenue to reach $2 billion, double the revenues of No. 2, Computer Sciences Corp., or No. 3, Northrop Grumman Corp.

The new Lockheed is also trying to expand its reach into the commercial infotech sector and the hot state and local market. Infotech "is a direction they are heading and one they have high growth expectations for," said Byron Callan, a stock analyst with Merrill Lynch & Co., New York.

One of the engines of this growth will be cash freed by internal cost savings to add to the $1 billion in discretionary research and development spending each year. The savings are coming from the 1994 merger of Lockheed Corp. and Martin Marietta Corp. "We expect to generate between $1.5 billion and $2 billion in free cash annually" from the mergers, according to Lockheed's 1995 annual report.

Moreover, the company's size -- 200,000 employees -- and expertise will allow it to subcontract more work to itself, share new technology developments and offer low-price bids, which will increase revenues and profits.

That's a very promising prospect for Lockheed. But a few points of caution are in order.

First, the company will focus much of its efforts on reducing debt, now estimated at $3 billion, plus the $9.1 billion cost of the Loral takeover.

Second, Lockheed is a defense company, earning 63 percent of its revenue from the Pentagon's research, procurement and support accounts. In contrast, the company earns 11 percent of its work from commercial contracts, 9 percent from NASA and 17 percent from international sales, mostly of weaponry and space technology. Using the most recent Pentagon figures, Lockheed Martin and Loral earned $10.3 billion in 1994 from defense contracts, or almost 11 percent of Pentagon spending.

But Pentagon research and procurement spending has fallen by more than 60 percent since 1985. Should the Pentagon's spending be cut further, despite strong resistance from some members of Congress, Lockheed's revenue will suffer, perhaps reducing its excellent stock price, running at roughly $77 per share. Moreover, Lockheed's revenue would be hit hard if it lost the gargantuan $100 billion-plus competition to build roughly 3,000 next-generation Joint Strike Fighters to replace Lockheed's F-16 fighter-bomber.

Third, Lockheed's rivals are also consolidating. Northrop Corp. and Grumman Corp. merged in 1994 to produce Northrop Grumman Corp., which then bought the Baltimore-based defense electronics business of Westinghouse Electric Corp. Northrop Grumman may continue on its acquisition binge by buying the defense electronics business of Rockwell Corp. Another possible buyer for Rockwell's defense business is McDonnell Douglas Corp., which has teamed with Northrop Grumman to win the Joint Strike Fighter contract. The contract is to be awarded by this fall.

But despite these caveats, Wall Street has a "generally optimistic" outlook for the company, said Callan.

Once Lockheed merges with Loral by the end of April, Loral is expected to add a sixth operating sector to the five sectors now maintained by Lockheed. The six sectors likely will be reorganized in the next year, but company officials declined to predict what changes will be made.

The Aeronautics sector, headed by James Blackwell, had revenue in 1995 of $6.6 billion. The sector's main program is the $100 billion effort to build the Air Force's F-22 electronics-intensive stealth fighter.

The $3.3 billion Electronics sector, headed by Thomas Corcoran, includes the Martin Marietta missile development unit in Orlando, Fla., and the Sanders electronic warfare development company in Nashua, N.H.

The $893 million Energy & Environment sector is headed by Albert Narath and includes companies in Houston and Oak Ridge, Tenn., where Lockheed operates the Oak Ridge National Laboratory.

The $7.5 billion Space & Strategic Missiles sector develops, builds and launches a variety of military spy satellites, as well as military and commercial satellites in Sunnyvale, Calif., and Denver.

The $4.5 billion Information & Technology Services sector, headed by Peter Teets, includes Lockheed Martin Enterprise Information Systems, Orlando, Fla., and Lockheed Martin Management & Data Systems in Valley Forge, Pa., and Reston, Va. The Information & Technology Services sector is developing a fingerprint identification system for the FBI, combat simulators for the Army and Air Force, a Global Command and Control System for the Pentagon.

The Information & Technology Services sector also includes the new Lockheed Martin Commercial Systems Group, an eight-company unit headed by Lockheed veteran Gary Mann.

This sector also includes the Lockheed Martin Services Group, which targets the federal market. It recently snagged a contract to modernize infotech at the Social Services Administration, the Treasury, FBI and Patent and Trademark Office.

The new Tactical Systems sector will be built on Loral revenues of $6.7 billion in 1995. This sector includes a variety of weapons, communications and surveillance programs, such as the shoulder-launched Predator anti-tank rocket.

One fragment of Loral -- Space Systems/Loral -- will be used as the core of a new space services company. Lockheed will keep a 20 percent share -- worth $344 million -- of this new company, whose main focus is its worldwide satellite-based Globalstar cellular-phone network.

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