The Top 5

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  Space News Business

The Top 5

posted: 14 August 2007
03:38 pm ET





LOCKHEED MARTIN





Lockheed Martin’s space business in 2006 was helped by the delivery of an unusually large number of commercial telecommunications satellites – five in total – that boosted revenue and helped nudge the company into the No. 1




position in this year’s rankings.

Most of the Bethesda, Md.-based company’s space sales are lodged in the Space Systems division, which in 2006 reported revenue of $7.9 billion, a 16 percent increase over 2005.





The U.S. government was the customer for 91 percent of the Space Systems division’s sales in 2006. Satellite programs accounted for 66 percent of sales. Major programs for the U.S. Defense Department include at least




three Advanced Extremely High Frequency communications satellites; the Space Based Infrared System (SBIRS), consisting of at least three and possibly four dedicated satellites and four SBIRS sensors hosted by classified satellites;




and the five-satellite Mobile User Objective System for the U.S. Navy, whose first launch is scheduled for 2010.

Lockheed Martin reports revenue from commercial satellite sales only after




the product is




delivered. Company officials have said recently that they will remain prudent in their approach to the commercial satellite market because prices remain at levels where profit margins are slim. They warned investors to expect fewer sales in this segment of the business, at least in the near term.

Space and Defensive Missiles is the second-largest component of the Space Systems division, accounting for 18 percent of sales in 2006. Space transportation is the third leg




, accounting for 16 percent of the revenue




. Lockheed Martin is the prime contractor for NASA’s Orion crew-transport vehicle, whose initial contract value




is $4 billion.

Lockheed Martin in late 2006 sold its stake




in International Launch Services (ILS), a commercial-launch venture that sells Russian Proton rockets




. Lockheed Martin reported Proton-related revenue




in 2006 of $110 million.

The ILS sale was followed in December by the creation of United Launch Alliance, a 50-50 joint venture with Boeing that will remove Lockheed Martin’s Atlas rocket sales to the U.S. government from the company’s books in 2007.

Lockheed Martin’s Information Technology and Global Services division also performs work maintaining NASA centers. The NASA work for this division accounted for $230 million in revenue




in 2006.

BOEING





For Boeing’s space business, 2006 was in part devoted to clearing the books of one-time charges concerning




ethics violations related to the Delta 4 program, which resulted in payments of more than $600 million; and in closing down its satellite-linked airline passenger Internet service, called Connexion by Boeing –




a $320 million charge.

The creation of the United Launch Alliance 50-50 joint venture with Lockheed Martin in December also is removing the Delta rockets’ government business from Boeing’s books, as some $1.9 billion in Delta government inventory is being sold, at cost, to the joint venture.



Boeing retains the rights to sell Delta rockets commercially, as demonstrated by the June launch of Italy’s first Cosmo-Skymed Earth observation satellite. Boeing is contracted to launch a second Cosmo-Skymed by early 2008 and is considered likely to launch at least one of the two remaining satellites in this series.

Most of Boeing’s space work is part of the company’s Network and Space division, which is




a part of the Integrated Defense Systems segment. The Network and Space division reported $11.98 billion in revenue in 2006, down 2 percent from 2005 because of lower contract volume for classified U.S. government work and lower revenue from the Ground-based Midcourse Defense program for the U.S. Missile Defense Agency.

Major government satellite programs include the five Wideband Global Satcom satellites, the first of which is scheduled for launch this summer.

Partly offsetting the revenue declines in 2006 were deliveries of three Delta 4 and two Delta 2 rockets in 2006, compared to just two Delta 2 rockets in 2005.

On the commercial front, Boeing Satellite Systems International continues to be selective in the bids it chooses to compete out of concern that commercial satellite profit margins are insufficient to justify a major effort in this market.

NORTHROP GRUMMAN





The acquisition of TRW’s aerospace business in 2003 made Northrop Grumman a major player in the space business, and space-related programs have been solid contributors to the company’s bottom line, providing 16.4 percent of the company’s total revenue.



Space work is spread out through a number of Northrop Grumman’s divisions.

The bulk comes from the Space Technology division in Redondo Beach, Calif., the former TRW Space & Electronics. In 2006 that division accounted for $3.35 billion, a slight drop from $3.39 billion in revenue in 2005. In filings with the U.S. Securities and Exchange




Commission, the company attributed the decline to reduced revenue on some classified programs, the “wind-down of a software defined radio program” and lower revenue on the National Polar-orbiting Environmental Satellite




System (NPOESS) program, which was the subject of numerous congressional hearings in 2006 for schedule delays and a




cost overrun of nearly $1 billion. Those losses, the company reported, were slightly offset by higher revenue on its contracts for the Airborne Laser and Advanced Extremely High Frequency satellite program.

While the company has had problems with cost overruns and schedule delays on NPOESS, a project involving the U.S. Air Force, the National Oceanic and Atmospheric Administration and NASA, its revenue on that program




has been increasing




over the long




term. The company received a $2.35 billion contract extension from the Air Force for NPOESS July 30. That brings Northrop Grumman’s total contract value on the program to $5.8 billion through 2016. The contract extension was a result of the 2006 restructuring of the NPOESS program.

In its




fourth quarter, the Space Technology segment grew 4 percent on the strength of higher revenue on its contracts for the Space Radar program, the James Webb Space Telescope and some classified programs.

EADS ASTRIUM





EADS’ Astrium division reported a 19 percent increase in revenue




in 2006 when measured in euro-to-euro terms on the strength of a fresh crop of satellite orders and the sharp growth of its satellite-services division.

Astrium’s
business is divided into three divisions: Satellites, Space Transportation and Services. In 2006, the space transportation division, which includes work on the French M51 strategic missile, accounted for 51 percent of Astrium’s total revenues of 3.2 billion euros ($4.4




billion).

The space division reported pretax earnings of 130 million euros, or 4 percent of revenues, compared to 2.1 percent in 2005. The profitability of the division has been a high priority for Astrium management.

Astrium
Space Transportation is prime contractor for the Ariane 5 rocket and is expected to sign a 35-rocket contract in late 2007 with the Arianespace commercial-launch consortium.

The satellite division accounted for 40 percent of revenue in 2006. Deliveries during the year included four commercial telecommunications satellites and three science satellites for European governments.

Astrium
Services accounted for 9 percent of the company’s revenue




. It is this division whose growth is expected to drive Astrium’s overall profitability in the coming years. Services revenue




grew 50 percent in 2006, mainly on the strength of the multi




year Skynet 5 contract with the British Defence Ministry.

Astrium
signed a similar long-term services contract with the German Defense Ministry in 2006 for the two-satellite SatcomBw project, in which Astrium has a 74.9 percent stake.

The German order helped increase overall Astrium backlog by more than 12 percent, to 12.3 billion euros, as of Dec. 31, 2006.

RAYTHEON





Raytheon’s space work accounted for about 20 percent of the company’s $20.3 billion in revenue in 2006. The company is a major supplier of satellite sensors and components, including radar, radio frequency (RF), infrared and electro-optical sensors and systems, command, control communication and intelligence (C3I), and missile systems.

During 2006 the company delivered the first Block 6 sensor payload for the Space Surveillance and Tracking System for missile tracking. Other Raytheon space programs include work on the Kinetic




Energy Interceptor, Exoatmospheric Kill Vehicle, the Patriot air and missile defense system, the Standard Missile 3, the Terminal High Altitude Area Defense battle management command, control and communication system, the National Polar-orbiting Operational Environmental Satellite System and a number of classified programs.

The company spent $464 million, or about 2.3 percent of sales, on research and development in 2006.



Space work is spread throughout several Raytheon divisions, including Integrated Defense Systems, which does ballistic missile defense; Intelligence and Information Systems, which provides ground systems for air and space systems including NPOESS; Missile Systems; and Space and Airborne Systems, which includes the company’s work on intelligence, surveillance and reconnaissance, and other space systems.

Raytheon Space and Airborne Systems announced in October 2006 that it would close in 2008 its Santa Barbara Remote Sensing facility in Goleta, Calif., which builds sensors for civil space programs. Raytheon encountered major problems with the Visible Infrared Imager Radiometer Suite, a key instrument for the civil-military




National Polar-orbiting Operational Environmental Satellite System. Those problems were cited in 2006 congressional hearings as primary reason for cost overruns on the program.