Thanks to the nuclear buildup in Iran, defense deals are pouring in. Backed by a solid reputation and loyal customers, Boeing (NYSE: BA) seems to have successfully cashed in on the scenario, as it ended 2011 with a bang.
After beating close rival Lockheed Martin by winning a $3.5 million multiyear contract from the U.S. Defense Department, Boeing has now retained its valuable customer, Saudi Arabia, in one of the biggest-ever foreign military deals in the United States.
Deal specifics
The Saudi-Boeing deal is valued at a whopping $29.4 billion, with Saudi Arabia acquiring 84 F-15 combat aircraft and modernizing of its existing fleet of 70 airplanes. The deal also includes sale of anti-radiation missiles, munitions, spare parts, maintenance and logistics for many years, along with the training of 5,500 Saudi personnel.
This action-packed deal will be supplemented by Raytheon's (NYSE: RTN) cutting-edge radar equipment. The same radar technology is also being used by the two THAAD systems, which Lockheed Martin is selling to the United Arab Emirates.
Boeing will begin delivery of the ordered aircraft in 2015, while the modernization plan will commence in 2014. The company is expected to receive the first installment from the deal a few months from now.
A time-tested relationship
Boeing's relationship with Saudi Arabia dates back 20 years. In 1992, Saudi Arabia purchased 72 F-15s. The value of the transaction totaled $9 billion, which acted as a constant source of revenue for Boeing until 1999. Given the looming defense budget cuts, Boeing sees Saudi Arabia as a market with immense potential.
The current deal is likely to fill Boeing's coffers for a long time. Plus, it will support nearly 50,000 jobs in the U.S. for at least a decade and aid 600 suppliers in 44 states.
The Foolish bottom line
Boeing certainly looks attractive, courtesy of these contracts. Moreover, the Iran tension could mean more contracts for the company in the future. Time to take stock of this one.
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