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Boeing: Looking for Export Markets to Grow Military Sales
Boeing's earnings in the first quarter of 2009 dropped nearly 50% compared to the first quarter of 2008, to a net income of $610 million, despite a 3% increase in revenues summed at 16.5 Billion. "The expanded global economic downturn is presenting unprecedented challenges in our commercial airplane market" said Boeing Chairman, President and Chief Executive Officer Jim McNerney. Boeing's defense business didn't fare that well either. Its Integrated Defense Systems (IDS) reported an increase of 2% to $7.7 billion quarterly sales, attributed mainly to communications and C4ISR, space and logistical support. Despite the increase, the IDS group earnings dropped 18%. By the end of the quarter the group recorded a backlog of 73 Billion. Boeing considers its defense division and its offering 'well positioned' in the market but, expecting domestic defense cuts, the company indicated it will increase its focus on international defense opportunities and pursuit of homeland security opportunities including border and cyber security markets in the U.S.
Boeing's international pipeline of opportunities includes C-17, F-15, F-18, P-8, helicopter sales, weapons and service & support packages. Along with maritime patrol aircraft (the P-8A) opportunities Boeing also pursue special mission platforms including communications and Airborne Early Warning and Control (AEW&C), communications and sensor platforms.
The company is evaluating the defense budget as it progresses through congress to determine the potential future effects of the Fiscal 2010 defense budget priorities, announced earlier this month. Boeing has anticipated changes in the U.S. defense budget for some time but has not yet adjusted its forecast to reflect possible reductions. IDS guidance for 2009 remains unchanged with revenues between $33 and $34 billion and operating margins of approximately 10%.
According to James A. Bell - Corporate President, Chief Financial Officer, Executive Vice President, during the quarter IDS maintained its robust backlog of $73 billion by offsetting run-off with capture of new business. IDS received contracts for 15 C-17s from the U.S. Air Force, B-22 performance based logistics and maintenance and operation support for GMD. In addition, UA announced its intent to purchase up to four C-17s. IDS achieved key program milestones including delivery of Japan’s third Aerial Refueling Tanker, loads calibration testing on the P8-A, a successful GMD ground test, and completion of the integrated mission test on future combat systems programs. The IDS team is performing across these businesses and is on track to achieve its goals for 2009.
