Whittaker Makes Deals to Balance Communications, Aerospace

Those who haven’t paid attention to the goings-on at Simi Valley’s Whittaker Corp. over the past year may not immediately recognize the diversified high-tech company.

Once completely focused on the aerospace and defense industries, Whittaker has made a big dent in the communications field of late.

And last week’s acquisition of Xyplex Inc., a communications networking operation previously owned by the Massachusetts-based Raytheon Co., underlined Whittaker’s goal of balancing its business equally between aerospace and communications.

The $117.5-million transaction, the largest acquisition in the history of the Ventura County company, was preceded by the 1995 purchase of Hughes LAN Systems Inc., which is now the cornerstone of the Whittaker Communications division of Whittaker Corp.

“Just a few years ago, Whittaker was an aerospace and defense company facing the prospects of the sectoral decline of the nation’s defense business and a drop in new aircraft orders and operations,” said Thomas Brancati, president and chief executive of Whittaker Corp. “We, like others in the defense industry, could see that changes had to be made to compensate for the anticipated declines in this business.”

So Whittaker began using its already-existing aerospace technology in the rapidly expanding area of communications.

Specifically, the same technology Whittaker uses to create a device that protects aircraft by scrambling enemy radar is now being used in commercial computer applications known as ATMs, or asynchronous transfer mode communications systems.

ATMs enable computer networks to transmit extremely large amounts of information at very high speeds.

James Schultz, director of business development for Whittaker, said the addition of Xyplex, which reported sales of $107 million in 1995, really puts Whittaker on the commercial communications map.

“We needed this to truly become a world-class player in the highly dynamic and fast-paced communications and networking business,” he said. “This is part of our strategy to realize significant growth and profitability on both sides of the company.”

“With an upturn in aerospace and communication, we are well on track to grow back to $1 billion in sales within the next five years,” he said.

For the 1995 fiscal year ended Oct. 31, Whittaker reported sales of $159.5 million with communications accounting for $30.5 million, or about 23% of the total. After the addition of Xyplex, Whittaker officials are predicting $300 million in sales for fiscal 1996, with about half coming from communications.

In the mid-1980s, Whittaker had annual revenues of nearly $2 billion. The company hit a low of $115 million in 1993 after shedding some of its noncore operations.

Whittaker networking systems are used mostly in health care, but also in the banking and finance, education and manufacturing fields.

“In today’s health-care market, hospitals are always looking for cost savings and efficiency,” Schultz said. “We integrate all of the [Department of Veterans Affairs] hospitals in the United States. We have done more than 50 Catholic hospitals around the country. They are all looking for high-tech database repositories.”

Hospitals use the networking systems for administrative functions such as purchasing, accounting and maintaining patient records, as well as medical functions, including the storage and retrieval of digital X-ray and MRI images. The networks also link hospitals within a given chain.

Schultz said Xyplex’s major markets are in education and manufacturing.

“They have a very broad customer base domestically and internationally,” Schultz said. “We have a very robust line of middle to high-end products, and Xyplex has middle to low end. Customers today require the full breadth of products.”