Boeing Co, the Pentagon's second biggest military-equipment contractor, will use contracts for the design of two Army warfare systems to showcase technology to other military branches that plan to rely more on computer integration.
Boeing merged its space and military businesses last year.
The strategy won it the job of devising the Future Combat System, a US Army program to design new tanks and troop carriers and to integrate them with robotic ground vehicles and unmanned spy planes in a centralized-command computer network.
The US Defense Department plans to spend about US$239 billion through 2009 to make its forces swifter, more lethal and communicate more easily. Boeing's management of the Future Combat System and the ground-based part of a missile-defense system will help it win orders from other military branches, Boeing Senior Vice President Roger Krone said.
"The other services are still in the formulation phase," said Krone, who heads Boeing's work for army systems.
"They are watching the Army to see how it goes, and what benefits the Army has obtained."
The Future Combat System, awarded last year, has a potential total value of US$23 billion, and Boeing's 1998 missile-defense award could be worth as much as US$55 billion. The Pentagon's investment in bringing its fighting forces into a high-tech realm comes as Boeing, the world's largest maker of jetliners, begins to rely more on defense contracts for sales.
Declining air travel has caused billions of dollars in losses at US airlines, forcing some into bankruptcy protection and gutting demand for new jetliners. Boeing expects its commercial-aircraft deliveries to drop by 27 percent this year to 280. That's almost half 2001's total of 527.
Sales in Boeing's Integrated Defense Systems unit, the product of the merged space and military businesses, rose 9.4 percent in 2002 to US$25 billion while revenue from selling planes fell 20 percent to US$28 billion. Total sales last year were US$54 billion.
"Right now their military division is doing well while the commercial-airline business is in a decline," said Brian Eisenbarth, fund manager at Davidson Investment Advisors, which has 225,000 Boeing shares. "The commercial drag will stop this year and the military business will provide more sales and earnings."
The Pentagon is seeking US$1.7 billion in the fiscal 2004 federal budget for the Future Combat System, Krone said. Boeing and its partner in designing the program, San Diego-based Science Applications International Corp., expect to perform work valued at 30 percent of that amount and to hire subcontractors for the rest, he said.
When Boeing Chief Executive Phil Condit relocated his company to Chicago two years ago from Seattle, its home since 1916, he said the move represented a commitment to growing beyond making airplanes and to cultivating more products with a technological angle.
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