Lockheed Says It Will Shed 8 Units, Reduce Management
Lockheed Martin Corp. said Monday that it plans to sell eight businesses, replace its chief financial officer and thin management ranks in a reorganization intended to increase profit and restore the faith of its shareholders.
The businesses put on the block have combined annual sales of $1.8 billion and include the Sanders warfare-electronics unit, which employs about 4,000 in New Hampshire. Lockheed’s five main business sectors will be condensed to four: aeronautics, space, systems integration and technology services.
Analysts said shareholders want Chairman Vance Coffman to send a bold message that the company is rebounding from the delayed aircraft deliveries and a series of rocket failures that have reduced profit this year. Lockheed said in June that it expects profit of at least $1.50 a share in 1999 and $2.15 in 2000. It earned $2.63 last year and $3.05 in both 1996 and ’97.
“This internal realignment really is a better approach to organize the company’s key business lines because it’s more responsive to customers and more closely aligned to the company’s technology strengths,” said Loren Thompson, a defense analyst with the Lexington Institute, a Washington think tank.
Robert Stevens, vice president of corporate strategic development and the man who designed the reorganization, will move into the job of executive vice president of finance and financial chief. He’ll replace Philip Duke, who was named to a new position overseeing Lockheed’s efficiency.
Lockheed Martin, the product of mergers or acquisitions involving about 15 companies, was seen as a collection of disparate parts that lacked focus, analysts said. The moves will cut the number of business lines to 17 from 27.
Lockheed said the changes won’t hurt earnings.
Shares rose $1.56 to close at $32.19 on the New York Stock Exchange. They’ve fallen 37% in the last year.
Trimming mid-level management is likely to make Lockheed “a more agile company, which in turn should allow Lockheed Martin to avoid the problems that have dogged it in the past year,” said Merrill Lynch analyst Byron Callan.
“We think there is something on the order of 500 to 600 [positions] that need to be looked at and seriously evaluated,” Coffman said.
The proposed divestitures will take six to nine months to complete and could fetch more than $1 billion in cash after transaction costs and taxes, Lockheed said.
Lockheed isn’t disclosing asking prices. It said it will also pursue joint ventures, partnerships and spinoffs.
Besides Sanders, Lockheed has named as businesses likely for sale its Infrared Imaging Systems in Lexington, Mass.; Fairchild Systems in Syosset and Yonkers, N.Y., and Milpitas, Calif.; the space-electronics business in Manassas, Va.; and Control Systems in Johnson City, N.Y., and Fort Wayne, Ind.
Other candidates include units in the environmental-management line of businesses, including Hanford Corp. in Richland, Wash.; Retech of Ukiah, Calif.; and the Energy Technologies unit in Bethesda.
As it eliminates those jobs, Lockheed plans to move all employees to common payroll and personnel systems that will enable the company to reduce excess personnel, the company said. Lockheed will try to combine services in common and reduce overhead costs in areas where it has a number of operating companies or facilities.
