The Boeing Company is synonymous with jets. But with profits harder to come by amid increased competition for planes,and bluer skies in space operations,Boeing is stepping up its move into new orbits.
“We are changing our image into a space company,” said James Albaugh, Boeing’s vice president in charge of the company’s Seal Beach-based Space & Communications Group.
Boeing is looking to global telecommunications and other space ventures for growth and profitability with a slowdown in its mainstay commercial jet business. But instead of just building and launching satellites, Boeing is finding it can generate revenue in niches such as mobile communications, satellite-based data and communications, air traffic manage ment and aircraft services.
“We think we can grow with those huge markets out there,” Albaugh said.
And the Seattle company, which employs 12,000 workers in Orange County, is serious about it. In 2000, Boeing made $5.25 billion in acquisitions.
In January 2000, Boeing acquired SVS Inc., a 115-employee firm in Albuquerque, N.M., that makes electro-optical systems and image processing gear.
In August, Boeing acquired Autometric Inc., a 500-employee company in Springfield, Va., which counts annual revenue of $80 million.
Then in October, Boeing paid $1.5 billion for Jeppesen Sanderson Inc., a 1,400-employee company based in Englewood, Colo. Jeppesen provides print and electronic flight information services, including navigation data, computerized flight planning, aviation software products, aviation weather services, maintenance information and pilot training systems and supplies.
Also in October, Boeing completed its big deal: the $3.75 billion acquisition of Hughes Electronic Corp.’s Space and Communications business.
“Hughes was the last part of the puzzle,” Albaugh said.
Boeing is the largest maker of satellites for government use and wanted the Hughes operation because it was the largest maker of commercial satellites.
Still, the majority,or about 60%,of Boeing’s $51 billion in revenue last year came directly from its commercial aircraft operations. The company is the biggest commercial aircraft maker and has 11,000 planes in service. Last year, Boeing saw its aviation revenue slip 12% on fewer aircraft orders. The company also has lost out on key contracts to European arch rival Airbus Industrie.
The picture is different at Space & Communications. The unit’s order backlog increased to 26% last year to $13.4 billion from 1999.
Space & Communications is the fastest-growing of Boeing’s operating groups and is seen as the “growth engine of Boeing,” according to a company spokeswoman.
Space & Communications produces about $10 billion a year in revenue. Except for the Jeppesen acquisition last year, all of Boeing’s recent buys have been merged into Space & Communications, including the former Hughes operation, now known as Boeing Satellite Systems.
The company’s other big unit is the Military Aircraft and Missile Systems Group, which brings in $12 billion a year in sales and is based in St. Louis.
One of Boeing’s new business groups falls within the company’s more-than-jets strategy: Connexion By Boeing, an Irvine-based group that looks to provide in-flight Internet access via satellites.
One of the early challenges for the unit has been providing seamless Internet access to jets speeding through the sky.
“It’s fairly easy to keep in contact with a satellite if you are walking down the street chatting on a cell phone. Think about it if you are moving 100 times as fast at 35,000 feet,” said Anne Eisele, a Boeing spokeswoman.
Boeing also wants to be the Internet access provider for the systems Connexion installs. Boeing already has flight-tested the program and installed it in a few small corporate jets, and is talking with 30 airlines for widespread use.
But Boeing is not alone. It counts a handful of in-flight rivals, including many with operations here in OC, including France’s Thomson-CSF Sextant In-Flight Systems.
“There are other people selling similar systems, but we think we are unique,” Albaugh said.
Boeing also wants to distribute movies, not to airlines but to theaters. The company has developed a system for delivering movies via satellite and showing them digitally.
“We think there is a market there,” Albaugh said.
The result: Boeing says it can drop the $1 billion cost of film distribution by 75%. But Boeing will have to win over theater owners and moviegoers, for whom 75-year-old, reel-to-reel technology is a staple. The company’s pitch is that over the long run digital maintains quality, whereas reel-to-reel films degrade. But digital projection and satellite network systems are required to show the films, at an estimated cost of $130,000 per theater, which could slow the system’s acceptance.
Closer to home for Boeing, the company also is working on a space-based air traffic management system that could put more planes in the air. Again, satellites are key.
“With ground-based radar, you can’t put any more airplanes up,” Albaugh said.
Boeing executives are looking in-house for more new ideas. The company has nearly 200,000 employees’ brains to pick for new ideas.
“We have a lot of bright employees with a lot of good ideas,” said Walt Rice, a Boeing spokesman.
Last year, Boeing started the Chairman’s Innovation Initiative, a program to encourage Boeing employees to think of new ideas and products.
“Our chief executive launched this initiative to inspire people to come up with ideas and revitalize the entrepreneurial culture in the company,” spokeswoman Amanda Landers said.
Boeing put $200 million into a five-year fund to bring valid ideas to market.
So far, it has received hundreds of applications for ideas and gave seed money to 70 of them. But it has only funded one so far beyond that. Out of the company’s Anaheim facilities came an idea for an unmanned submarine to be used for underwater surveying, which Boeing said is a multi-billion-dollar market.
The newly funded Anaheim group, not yet named, expects to produce an unmanned underwater vehicle for use by oil, gas and telecommunications companies. Oil and gas companies need detailed maps of the sea floor before they can begin drilling. Boeing hopes telecommunications companies can use the vehicle to find the best routes to lay undersea cable. n
