Raytheon to Restructure Unit, Source Says

Raytheon Co. plans to revamp its massive defense electronics business, a person familiar with the situation said Monday.

The No. 3 U.S. defense contractor will pare from five to four the number of units in Raytheon Systems Co., which accounts for nearly three-quarters of the company’s revenue, the person said. The heads of those units will report directly to Raytheon Chairman and Chief Executive Daniel Burnham instead of to the head of Raytheon Systems, the source added.

A Raytheon spokesman would not comment on the expected changes, first reported in Monday’s Wall Street Journal.

Raytheon’s Class A shares rose 63 cents to close at $26.56 on the New York Stock Exchange, closer to its 52-week low of $21.25 than the high of $75.38.

Raytheon shares plunged last month after the company announced charges totaling $668 million and said revenue and profit for this year and next would fall far below analysts’ expectations.

Company watchers said the expected shake-up should help address communications problems Burnham described last month during a conference call to discuss the company’s disappointing performance. During the call, he said Raytheon managers had not provided realistic assessments about what their units could deliver.

“The more accountability they can drive into the business units, the better,” said analyst William Fiala of Edward Jones.

Pierre Chao of Credit Suisse First Boston said the move is part of an ongoing process to make Raytheon leaner, more efficient and better controlled. “It’s a continuous process. There’s no quick fix,” he said.

The Journal also reported that Raytheon was mulling a sale of its engineers and constructors unit, which has long been a drag on Raytheon’s overall performance.

The company declined comment on whether it planned to unload that unit, which builds power plants and other major infrastructure projects.