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Tuesday, September 28, 1999

Lockheed to sell 4 divisions in effort to be more efficient

Associated Press

   BALTIMORE - Lockheed Martin Co. announced a major restructuring Monday, including changes in top management and a corporate realignment. The defense contractor said it plans to sell eight businesses that employ 9,000 people.
   The businesses to be sold include a New Hampshire firm that makes "black box" data recorders in airplanes and a Washington state firm that is cleaning up a nuclear reactor site. The businesses have combined annual revenues of $1.4 billion.
   But some Wall Street analysts were disappointed that Lockheed, the No. 1 defense contractor in terms of sales, decided not to tackle problems in its aerospace business, which has experienced some costly setbacks and failures.
   Lockheed, which had 161,000 employees and $26 billion in sales last year, will reorganize into four core businesses by the end of the year, replacing five semiautonomous sectors that often competed with each other, said spokesman James Fetig. The reorganization will result in an unspecified number of layoffs at Lockheed's Bethesda, Md., headquarters.
   "You're looking at a company trying to get its arms around what they own following the acquisition of several dozen companies over the last decade," said Christopher H. Mecray of Deutsche Bank Alex. Brown. "This is one of the steps they're taking to flatten out a structure that has kind of gotten out of control."
   Changes were also announced at the top. Robert J. Stevens, vice president of corporate strategic development, will take over as chief financial officer, replacing Philip J. Duke, who is leaving the post after less than a year. Duke was named to an executive vice president post in a new division responsible for improving the company's efficiency.
   Arthur E. Johnson, president of the company's information and services sector, replaces Stevens.
   Lockheed said the actions would not affect the earnings outlook for 1999 and 2000. Sale of the eight businesses is expected to offset the anticipated $1 billion in lost revenue.
   Lockheed's reorganization effort, which was launched in June, comes in the hopes of restoring sagging profits and investor confidence. The company reported a second-quarter loss in July of $41 million, due in part to launch failures.
   Investors seemed generally pleased with the details of the reorganization. Lockheed's stock, which has been in a slump, rose $1.56 or 5 percent to $32.18 on the New York Stock Exchange.