No. 2: Boeing's IDS unit soars

Satellites, services drive growth for defense giant

Boeing Co.

Top 100 Revenue: $9.7 billion

2007 revenue: $66.4 billion

2007 net income: $4.1 billion

2006 revenue: $61.5 billion

2006 net income: $2.2 billion

Employees: 160,000

Boeing Co.'s problems with its aircraft business
haven't been a drag on its Integrated
Defense Systems group.

The group, which includes Boeing's information
technology and systems integration
business, lands at No. 2 on the 2008 Top
100 with $9.7 billion in prime contracting

With 72,000 employees worldwide, IDS
does most of its big money work for the
Defense Department. It develops advanced
weapon, intelligence and surveillance systems,
communications architectures, and
large-scale integration projects. This past
year, IDS also netted some big wins in the
civilian arena, including a
$695 million deal to
design and manufacture
communications satellites
and upgrade satellite
ground facilities for
NASA. This contract
could be worth as much as
$1.2 billion if all options
are exercised.

Boeing will develop the
next generation of NASA's Tracking and
Data Relay Satellites (TDRS), a satellite line
the company has previously worked on. The
NASA contract obligates Boeing to deliver
two satellites, bringing the company's overall
satellite backlog to 27. The first of the
pair, the TDRS-K, will be ready for launch
in 2012, while its twin, TDRS-L, should
launch in 2013.

Any clouds darkening Boeing's financial
horizons are likely to be political. Analyst
Paul Nisbet, president of JSA Research, of
Newport, R.I., said the presidential election
could reshape the defense contracting landscape.
That could be problematic for some of
the company's government work, notably in
missile development and the still-controversial
Future Combat Systems program, an
Army modernization effort designed to
link soldiers to a wide
range of weapons, sensors
and information systems
via a mobile network

Boeing is still smarting
from its loss to Airbus on a contract to
design and build a next-generation tanker
aircraft for the Air Force.

The company is protesting the $35 billion
Air Force award to the Airbus parent,
European Aeronautic Defence and Space
Company, and its U.S.
partner, Northrop

"There are quite a few
ifs, but we still recommend
the stock," Nisbet

"You can't ignore the
fact they have 5 1/2 years
of production in the
pipeline. It's a quarter of
a trillion dollars' worth."

Although Boeing's military sales are
strong, they are shrinking compared to the
commercial side.

Through 2012, Nisbet estimates a 1 percent
decline per year for the defense business
compared to an annual 8 percent
increase in commercial sales. Overall,
Boeing's revenue in 2007 was $66.4 billion,
of which $32.1 billion came from the IDS
group. The group includes Network and
Space Systems, with $11.7 billion in revenue,
and Support Systems, with $6.7 billion in

Given its overall market strength, Boeing
doesn't expect an especially rough ride.
Looking at the company's range and breadth
of programs, "we think we can withstand
turbulence in our marketspace," said Jeff
Trauberman, vice president of business
development at Boeing's Network and Space
Systems unit, an element of IDS. "We have
an energized leadership and management.
We have a diversity of customers. And we
have people we can deploy from one program
to another."

One high-visibility program for which
Boeing is the prime contractor is the surveillance
system known as SBInet, which is
intended to monitor and safeguard the
United States border with Mexico. The company
won a $64 million task order in
December to develop the first phase of the
virtual fence project. It includes development
of a common operating picture that
would provide a comprehensive view of field
operations in near-real time.

Although the project has been a source of
controversy, the company has completed the
first prototype section on a 28-mile stretch
of the border between Arizona and Mexico.

The Homeland Security Department recently
announced it was rebuilding the section
into a permanent installation of towers and
surveillance systems.

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