The Boeing Company generates over a third of its revenues and returns from defense operations. Combining commercial and defense aerospace operations in the same enterprise has proven beneficial to shareholders, because the two market segments follow different rhythms and that tends to smooth out revenues over time. However, much of Boeing’s defense business is grounded in legacy military franchises of the McDonnell Douglas Corporation, which became part of Boeing in 1997. As these franchises begin to fade, Boeing will need to take several steps to maintain its leading role in defense. One such step is to acquire the aerospace operations of another first-tier military contractor, with Northrop Grumman being the obvious candidate. I have written a commentary for Forbes here.
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