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June 29, 2016Loren B. Thompson, Ph.D

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After Five Years Of Flat Revenues, Strategies Of Big Defense Companies Begin To Diverge (From National Interest)

June 29, 2016Loren B. Thompson, Ph.D

Big U.S. military contractors have begun making major strategic moves as they weather the sixth year of a downturn in domestic military demand.  Initially the companies were content to apply the usual litany of tactical measures deployed whenever Pentagon demand goes soft, such as divesting under-performers and buying back shares.  Those measures have worked very well in delivering shareholder value.  But with little forward visibility as to when weapons spending will rise, companies are pursuing diverse approaches to jump-starting growth.  Lockheed Martin is jettisoning most of its services business while expanding into rotorcraft.  Boeing is expanding in services, space, and militarized jetliners.  Raytheon is positioning to be a dominant provider of cybsersecurity services.  And Northrop Grumman has turned to increased internal investment following its win of the B-21 bomber, which presumably means fewer share buybacks in the future.  I have written a commentary for The National Interest here.

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