Raytheon Has Found Diversification and Stability Overseas as Foreign Customers Come Calling, Execs Say
Leaders at the Waltham, Massachusetts-based aerospace and defense company have been crisscrossing the globe in recent years as foreign sales have become an ever-larger slice of its business.
What does it take to be a top Raytheon executive these days? Sturdy luggage, a travel charger and a whole lot of passport stamps, for starters.
Leaders at the Waltham, Massachusetts-based aerospace and defense company have been crisscrossing the globe in recent years as foreign sales have become an ever-larger slice of its business. This week they’re on the road again at the Farnborough International Airshow, meeting with foreign customers and unveiling new products tailored to international markets.
“We put on a real push to grow internationally,” said Tom Culligan, CEO of Raytheon International, Inc. “It gives you worldwide scope and reach, and, I think, makes you a stronger company.”
Customers outside the United States accounted for 25 percent of Raytheon’s sales last year, up from 18 percent in 2004, its annual reports show. Total foreign sales were $6.2 billion – a 68 percent increase over the $3.7 billion the company reported in 2004.
That rise has come even as Raytheon has spun off civilian businesses like aircraft manufacturing, and it has provided an important supplement to the U.S. defense business.
“It’s easier for U.S. companies to hunker down and stay home,” Culligan said. “But the other side of that coin is that there is a huge market out there that’s available to us. It takes time and effort, but it’s one of the things that this company’s known for and we’re quite proud of.”
Over the years Raytheon has learned that foreign defense budgets are often more stable than U.S. ones, Culligan said.
“Statistically we’ve found that once you get in a budget – an international budget – the sale will go through,” Culligan said. “It takes longer to make an international sale, but it’s less volatile.”
At Farnborough Raytheon is focusing on ways to help countries stretch those budgets further.
This week it announced successful tests showing that its Evolved Sea Sparrow Missile can be fired from the National Advanced Surface-to-Air Missile System. That means users of the NASAMS system can fire three missiles of varying ranges from their existing equipment.
Other Raytheon tests have looked at ways to extend use of the popular Hawk surface-to-air missile system, which is operated by 17 countries.
Raytheon is also marketing plug-and-play upgrades for older aircraft like the F-16, which is flown by more than 20 nations.
The improvements include a drop-in digital cockpit unit and the Raytheon Advanced Combat Radar, which can see twice as far as older radars, look in different directions simultaneously and track more targets.
The company’s civilian businesses, meanwhile, are tapping into huge growth in air traffic in developing countries, said Dan Crowley, president of Raytheon’s Network Centric Systems. Countries are turning to the company for turnkey systems that include everything from sensors to training, Crowley said.
“In the U.S. (customers) often have pieces of the solution, but they’re buying additional components and then looking Raytheon to integrate them,” Crowley said. “Instead, many of our international customers are saying, ‘Give me a complete solution.’”
Raytheon has also invested abroad through subsidiaries like Raytheon Australia, which is involved in submarines and destroyers, and through partners like Thales in France and Kongsberg in Norway. Raytheon UK is a major producer of air traffic control equipment.
In other countries, Raytheon is finding suppliers and building joint ventures to help countries broaden their economies.
Last month Raytheon Chief Executive Bill Swanson presented awards to Roketsan and Aselsan, Turkish companies making parts for the Patriot air defense system.
Raytheon also works with foreign suppliers on its Evolved Sea Sparrow Missile, the Rolling Airframe Missile and the AMRAAM missile. It’s developing a version of its Standard Missile-3 with Japan’s Mitsubishi Heavy Industries and the TALON laser-guided rocket with the United Arab Emirates.
Foreign governments have played a valuable role in finding partners, said Taylor Lawrence, president of Raytheon Missile Systems. The Norwegian Ministry of Defense, for example, helped find a fuel supplier for Raytheon’s AMRAAM missile.
“We look for partnerships that governments in the countries support,” Lawrence said. “It’s all about building business and building a business footprint.”
In other countries Raytheon has taken a lead on education, especially math and science programs. Programs like the Kingdom of Saudi Arabia Leadership Development Program give Raytheon work experience to foreign students.
The idea, Culligan said, is to create leaders around the world who know Raytheon and understand its values.
Furthering its engagement with the Kingdom of Saudi Arabia, Raytheon and Pannesma Company Limited (subsidiary of Atheeb Group) have entered into an agreement to establish a joint venture company. The Joint Venture Agreement, signed by both parties at the 2012 Farnborough International Airshow, underscores Raytheon’s and Pannesma’s long-standing partnership and Raytheon’s ongoing commitment to support and expand Saudi Arabia’s industrial, educational and technology bases.
“What we envision for the future would be a worldwide network of partnerships and joint ventures, where we have people that we’ve helped train - that become sort of the Raytheon mind, if you will,” Culligan said. “They know our company. They become ambassadors.”
In the end, the secret to doing business abroad is understanding other societies’ long-term goals, said Tom Kennedy, president of Raytheon’s Integrated Defense Systems business. All countries, he said, want to see their citizens succeed while keeping them safe.
“When it comes down to it, everybody has the right intentions,” Kennedy said. “In the defense business, they want to make sure they can defend their country and do the right thing for their country and their people.”