Raytheon's Infotech Unit Holds Growth Card

Raytheon's Infotech Unit Holds Growth Card<@VM>Raytheon Command, Control, Communication and Information Systems Division

Frank Marchilena

Raytheon Co., which took a drubbing on Wall Street last year, is counting on its information technology business to grow at a faster clip than any other division in 2000.

Frank Marchilena, president of the company's Command, Control, Communication and Information Systems unit, is eyeing lucrative efforts, such as the Air Force's Integrated Space Command and Control contract, as a vehicle to grow his business.

Marchilena's unit, which grabbed $3.5 billion of the Lexington, Mass., company's $19.5 billion in 1998 revenue, has tapped several integrators to help it land that contract: Computer Sciences Corp., Logicon Inc., OAO Corp. and Veridian Inc.

With a new management structure put in place that sees him report directly to Raytheon Chairman and Chief Executive Dan Burnham, Marchilena expects his unit to become a more nimble player.

Marchilena spoke with Washington Technology Staff Writer Nick Wakeman about his strategy to win large-scale systems integration work, network-centric warfare projects and pull in vital infotech revenue.

WT: How does the restructuring change the way your division operates?

Marchilena: There was a layer of management in there, and now it is gone. Our customers will see a more agile Raytheon. You have to be able to make decisions quickly, and this will help us do that.

WT: Raytheon is obviously pushing hard in the network-centric warfare arena. Why is it important?

Marchilena: Network-centric warfare is our biggest growth area. We have all the elements to play in that environment.

Our technical expertise is in areas such as systems integration, systems engineering, software development and communications. Those are all important elements of network-centric warfare.

Network-centric warfare really is about being a force multiplier. If I am able to understand more about the enemy, it literally takes less hardware to defend against them or to attack them. If I know where the enemy is, I don't have to defend all points.

WT: Who are your main opponents for these contracts?

Marchilena: Boeing, Lockheed Martin, Northrop Grumman, General Dynamics, TRW and Litton Industries.

WT: What projects are you pursuing in this arena today?

Marchilena: The largest one right now is the Integrated Space Command and Control contract. [The planned $1.5 billion effort will modernize and consolidate functions at the command and control center for space operations near Colorado Springs, Colo.]

We are one of three teams going after that contract. [Lockheed Martin Corp. and TRW Inc. lead rival teams; two of the three teams are to be selected for additional work by Feb. 7.] This contract fits into the exact paradigm of communications with the processing of data and integration of different systems.

WT: Raytheon has made several major acquisitions during the past few years, including its purchase of E-Systems, Hughes Electronics and Texas Instruments' defense electronics and information unit. Is the company still looking to make deals?

Marchilena: We were in there looking at GTE. [General Dynamics Corp. bought GTE's government information and communication systems units in September 1999 for about $1 billion.]

My division is going to look at acquisitions in areas such as communications and data assurance. The division also has divested various businesses in the last two years. The most recent example is our aircraft simulation business. [Raytheon sold it to L-3 Communications Jan. 10 for $160 million.]

I don't think our division is going to do more divesting. What we have now, we consider core business.

WT: What are the major drivers of your business?

Marchilena: This division has the greatest potential for growth in Raytheon, and that is because the military is thinking network-centric. So that is major for us.

One of the biggest things is information processing. That is where everyone is looking. Associated with that is the assurance of data, making sure the data is correct and that integrity of the networks are maintained.

One product that we have been selling to the government, SilentRunner, is in the process of being brought to the commercial market. SilentRunner [which provides real-time analysis and auditing capabilities of networks] also is an example of bringing our defense work to the non-defense market.

WT: In what other ways does your defense work carry over into civilian and commercial business?

Marchilena: The air traffic control systems we build are a direct result of being involved in air defense work. Many of the basic technologies are the same, such as the systems engineering, the software and the ability to build communications equipment.

Take SIVAM [the Amazon River monitoring system Raytheon built for the Brazilian government]. You have airplanes tracking ground stuff and other airplanes. And you have satellites looking down on everything.

If [the government] is trying to go after a drug runner, it is the same basic combination of information that you use to shoot someone down. Essentially, it is the same technology being used over and over. Business: Information and communication systems used by the military, air traffic control, intelligence and other government agencies

Headquarters: Marlborough, Mass.

President: Frank Marchilena

Revenue: $3.5 billion

Employees: 22,000

Locations: 44 offices around the world

Web Site: www.raytheon.com

Ticker: RTNB on New York Stock Exchange

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