Boeing And Lockheed Positioning To Dominate Global Arms Market

[Raggz]

Source: Forbes

Last week the nation's two leading military contractors reported second-quarter results, and although the numbers weren't all that bad, both companies said they needed to adjust their sales mix to maintain revenue growth in the future.

Specifically, Boeing and Lockheed Martin said they needed to grow international sales as domestic demand for military goods softens, a strategy that has already been embraced by many of their competitors. Lockheed Martin Chief Financial Officer Bruce Tanner stated a desire to grow overseas sales from 13 percent of current revenues to 20 percent, while Boeing Chief Executive Officer W. James McNerney stressed his company's need to boost military exports -- as opposed to commercial transport exports, where Boeing already sells most of its product overseas.

Of course, there are two ways companies can boost the percentage of their revenues and returns derived from foreign sources. One is to do more business abroad. The other is to shrink domestic sales. It's the latter possibility that currently preoccupies the leaders of defense companies, because U.S. demand for military goods appears to be headed into the third big downturn seen since the modern defense industry emerged in the 1950s. The previous downturns -- in the 1970s and 1990s -- cut domestic demand for weapons by an average of 50 percent, and with the government projecting budget deficits of well over a trillion dollars both this year and next, the possibility of similarly deep cuts in defense outlays over the coming years can't be discounted. Defense secretary Robert Gates, who has already slashed planned weapons outlays by $330 billion since the Obama Administration took office, warned industry leaders in a private meeting last week that the Pentagon must become more efficient to stave off big defense cuts by the White House.

Read more: http://blogs.forbes.com/beltway/2010/08/02/boeing-and-lockheed-positioning-to-dominate-global-arms-market/?boxes=Homepagechannels

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Translation, as US arms demand slows, the big boyz look elsewhere ...