A NEW ROCKWELL? : NEWS ANALYSIS : Firm Has Made No Secret of Its Commercial Bias
A sale by Rockwell International Corp. of its aerospace and defense operations would be a dramatic move but not a surprising one.
For most of the last decade, Chairman Donald R. Beall’s mission has been to transform the Seal Beach-based company from a government-dependent defense contractor into a high-tech electronics conglomerate.
Rockwell has made no secret of its desire to strip itself of its stodgier business lines. And the defense and aerospace operations are among Rockwell’s stodgiest.
Company revenue from defense and aerospace dropped in 1995 by about 5.3% to $3.4 billion--down $191 million from the year before.
Beall and other company executives Wednesday refused to discuss the fate of the 20,000-employee operations. Sources say Rockwell is testing interest from possible buyers. But in the past, Beall has said growth at Rockwell won’t come from defense work.
In fact, since 1985, Rockwell has replaced about $4 billion of annual defense and government revenue with commercial business. The company in fiscal 1995 earned only 28% of its nearly $13 billion in revenue from government sources, down from 61% a decade earlier.
Earlier this year, Beall told an interviewer that he saw Rockwell at the end of the decade as a company “even more focused on commercial electronics.”
Rockwell executives who have been spreading the company’s message of diversification on Wall Street routinely tell analysts that they see future income growth coming from the Newport Beach-based Semiconductor Systems division and the industrial automation and automotive products units in Wisconsin and Michigan.
Beall, who joined Rockwell in 1968 and ran several of its major divisions on his way up the corporate ladder, has insisted that each of Rockwell’s various business units must be a market leader and have growth potential.
If not, the unit gets sold.
And growth potential is the most important part of the equation. Rockwell has sold several profitable units that have led their markets because executives decided the units simply couldn’t grow enough in the future.
In the last decade, Rockwell has sold 27 operating units and currently has its industry-leading commercial and newspaper printing press division on the market as well.
But when it sees potential, Rockwell is lavish in its support. The company has spent more than $400 million expanding its Semiconductor Systems division, which grew from $250 million in sales in fiscal 1990 to $987 million last year.
Revenue from the Southern California aerospace and defense operation is expected to be stable at best in coming years, said analyst Anthony Ginsberg of Fourteen Research in New York.
At the root of Rockwell’s problem with the division, analysts say, is its relatively small size and lack of focus. It does too many things and has no major aircraft or missile platform, as do companies such as McDonnell Douglas Corp., Boeing Co. and Northrop Grumman Corp.
“Rockwell is doing maintenance on the B-1 bomber and the space shuttle,” not building jets, said Ginsberg. “They are also very good in defense electronics, but we’ve seen how other defense electronics companies have been merging. It takes a very large company to be successful in aerospace these days,” he said.
Indeed, Beall initially was interested in buying another defense or aerospace business to make Rockwell’s into a major player. He starting considering a sale of the business when he couldn’t find a suitable acquisition, sources said.
But he may have waited too long to go looking for a buyer.
Most of the big defense and aerospace companies have already cemented marriages--most recently, Lockheed Martin Corp. is planning to acquire the defense operations of Loral Corp., including the company’s 1,100-employee Aeronutronic division missile and weapons control plant in Rancho Santa Margarita.
