What will this mean for Ovonyx's new venture? I now someone else on the board was recently discussing just such a development as this:
Lockheed Martin May Sell or Shut
Some Operations to Bolster Company
By JEFF COLE
Staff Reporter of THE WALL STREET JOURNAL
Lockheed Martin Corp. is considering the sale or shutdown of some core satellite and
military-aircraft operations, as the defense giant expands efforts to reverse its flagging financial
performance, according to senior executives familiar with the initiative.
The expanded list of possible actions includes selling or closing some operations in Sunnyvale,
Calif., that produce commercial and military satellites, or placing them in new ventures with
other companies, these executives said. Similar moves are under consideration relating to
operations in Marietta, Ga., that produce C-130J military-transport planes and fighter aircraft,
such as the advanced F-22.
In an interview earlier this week, Chief Financial Officer Robert Stevens said only that the
company is "not restricting in any way" its review of actions that could be taken to improve
results. Mr. Stevens declined to discuss details and emphasized that no decisions have been
made. He said that in keeping with recent statements by Chairman and Chief Executive Officer
Vance Coffman, "We're managing the business for cash. We're managing the business for
value."
Expanded Options
The moves under review at the 150,000-employee defense concern greatly expand the options
that were under consideration prior to Oct. 29, when Lockheed Martin announced that two of
its top executives were retiring. The company also acknowledged at that time that earnings next
year are expected to reach only about $1 a share, less than half the $2.15 predicted by
Lockheed Martin in late September.
The recent departures of President and Chief Financial Officer Peter Teets and military-aircraft
chief James A. Blackwell are seen as opening the door to the new options now under review.
The retirements capped a difficult year of program problems and a long string of other
departures by senior executives.
Lockheed Martin shares, which have dropped sharply this year, were up 62.5 cents to
$19.8125 at the 4 p.m. New York Stock Exchange close Thursday, compared with a 52-week
high of $54.625.
In late September, the Bethesda, Md., company announced a reorganization of business lines,
along with plans to shed assets that generate annual sales of about $1.4 billion. Those moves
were seen by investors as insufficient. Executives had then signaled that the most dramatic
actions under review included cuts in capital expenditures and accelerating the search for
outside investors for a new telecommunications subsidiary.
Search for New Officers
Investors have sensed recently that more substantial actions would have to wait until the search
for a new president and chief operating officer is completed by Mr. Coffman and outside board
member Eugene Murphy, a General Electric Co. vice chairman. Lockheed Martin executives
say the search, which could be difficult, isn't seen as delaying any of the significant new plant
closings and other moves under consideration. Final decisions, nonetheless, could take
months.
The list of new options under review includes closing or otherwise reconfiguring some of the
company's longest-standing operations. Mr. Stevens, who assumed his finance post in a
September shake-up, said that given the urgency of Lockheed Martin's financial shortfalls, the
company can't afford to view certain of its lines with "pure emotional affection." He added:
"Business history is replete with examples [of companies] that were extinguished because of
that behavior."
Executives said parts of the California satellite operations could be closed, placed in ventures
with other companies, or moved to operations near Denver, where Lockheed Martin makes
rockets for launching government and commercial satellites. The aircraft operations in Georgia
could be scaled back or combined with factories at Fort Worth, Texas. Some could be moved
to company operations near Palmdale, Calif., or combined with similar programs at other
aircraft makers.
Congressional Concerns
Executives cautioned that any such moves are thick with political, contractual and cost-related
complications. All the sites involved represent major centers of government employment, and
job losses associated with the moves could prove sensitive in Congress, where many of the
programs are funded.
The 11,000-employee satellite and missile-defense unit at Sunnyvale, Calif., has for decades
included operations that make top-secret imaging and communications satellites for the
Pentagon. Following the merger of Lockheed Corp. and Martin Marietta Corp. in 1995,
divisions in the eastern U.S. that produced civil and commercial satellites were consolidated at
the California site.
Supplier-related problems hurt the performance of commercial-satellite operations last year, and
more recently demand for all such satellites has dropped sharply as certain leading
satellite-telephone ventures have faltered. Earlier this year, the Sunnyvale operation suffered a
serious blow when rival Boeing Co. won a contract valued at about $5 billion to develop a
satellite imaging system for the government. Boeing also recently beat out Lockheed Martin in
a competition to develop a national missile-defense system.
Albert Smith, who assumed the top job over Lockheed Martin space operations with the
retirement earlier this year of Thomas Corcoran, declined to discuss details of the latest review. |
