Breakfast News


Thursday, September 23, 1999

"Management is nothing more than motivating other people."
-- Lee Iacocca.

Lockheed Martin Readies Plan to Turn the Battleship

By Richard McCaffery (TMF Gibson)

Defense contracting giant Lockheed Martin (NYSE: LMT) plans to simplify its management structure, pool divisions, and sell assets that generate about $1 billion in annual sales, The Wall Street Journal reported today.

The moves, which reportedly will be presented to the Bethesda, Maryland company's board of directors by its chief executive this afternoon, come in the wake of a tough year for the nation's largest defense contractor.

Declining sales and poor quarterly performance, lost contracts, and rocket failures have pounded the company's stock down to a 52-week low of $32 11/16, reached yesterday.

With 1998 sales of $26.2 billion, Lockheed has a full closet. It builds military aircraft and defense systems; constructs, launches, and operates satellites; and provides energy and environmental services as well as a host of other technical products and services. The company has facilities in 457 cities and 45 states, and operations in 56 nations and territories.

After a lengthy financial review completed in June, Lockheed reduced its earnings forecast for 1999 and 2000 as a result of increasing costs, product delays, and reduced production rates. Vance Coffman, Lockheed's chairman and chief executive, said demand for products remained strong; he estimated Lockheed had $20 billion in contract opportunities over the next 12 months, and vowed the company was committed to improving performance and shareholder value.

The company is considering such measures as consolidating several major lines of business to improve communications, and selling some environmental service businesses as well as aircraft electronics systems and flight control units, the Journal reported.

Lockheed has already started implementing recommendations handed down in May from an independent panel's review of its Space & Strategic Missiles sector. Actions include improving management oversight and accountability, better training, and improved cost emphasis.

News to Go

Hawaiian Airlines has awarded aircraft manufacturer and defense contractor Boeing (NYSE: BA) a $430 million contract to build 13 Boeing 717-200 regional jets, which will be used to carry passengers from island to island. The first jet will be delivered in February 2001.

Internet and long distance telecommunications service provider Global Crossing (Nasdaq: GBLX) will replace U.S. long distance firm Frontier (NYSE: FRO), the company it's buying, on the S&P 500.

The Florida attorney general's office hit drugstore chain Rite Aid (NYSE: RAD) with deceptive trade practices and racketeering charges yesterday, Reuters reported. The charges maintain, for example, that the company billed customers different prices for the same prescription. Rite Aid denied it did anything improper in a statement. "Not one customer was deceived or defrauded," the statement said.

A Lockheed Martin Atlas rocket successfully launched a spacecraft owned by satellite television broadcaster EchoStar Communications (Nasdaq: DISH) into orbit from Cape Canaveral this morning. The $250 million satellite, EchoStar 5, is part of a constellation that will broadcast 500 television channels to customers nationwide.

Pharmaceutical companies Merck (NYSE: MRK) and CollaGenex (Nasdaq: CGPI) have agreed to jointly market Vioxx, the pain relief medication that treats osteoarthritis and other painful ailments.

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