Lockheed Martin chief sees cybersecurity, health IT in its future

After taking several high-profile hits in the Pentagon's fiscal 2010 budget, Lockheed Martin Corp.'s chief executive said Wednesday that the firm is looking for new business opportunities to broaden the aerospace giant's portfolio in an era of shifting defense priorities.

Despite the Obama administration's decisions to end F-22 Raptor fighter jet production and kill other lucrative Lockheed Martin programs, such as the VH-71 presidential helicopter, Bob Stevens emphasized that the long-term outlook for his 140,000-employee company is positive.

"You see an inflection point in the business where the balance of 2009 -- and probably '10 and '11 -- are flat-ish with probably some rebalancing of our portfolio because there won't be more F-22s," Stevens said during a roundtable interview with National Journal Group reporters and editors. "The long-term trajectory, to me, looks very healthy."

Indeed, defense programs such as the F-35 Joint Strike Fighter, missile defense and classified satellites -- the bread and butter of Lockheed Martin's portfolio -- still are expected to claim large portions of the U.S. defense budget, even as growth in procurement accounts slows or even decreases over the next several years.

But Stevens acknowledged that the Bethesda, Md.-based firm will have to continue to grow its business in emerging areas such as energy security and cybersecurity to remain competitive.

Stevens pointed to the firm's decisions in recent years to compete for the Joint Lightweight Tactical Vehicle -- successor to the venerable Humvee -- and the Navy's Littoral Combat Ship as key moves to diversify the company's Air Force-heavy portfolio to reflect changing spending priorities.

In addition, Lockheed has been moving into other areas, such as providing more efficient logistics and sustainment solutions for the military. It may even develop information technologies for healthcare organizations to manage information, Stevens said.

As the firm adjusts its business plans, Stevens said Lockheed Martin is positioning itself to respond to Defense Secretary Gates' call for industry to pursue so-called "75 percent solutions" that are less expensive and can be delivered on time rather than focusing primarily on "exquisite" technologies with considerable costs and development risks.

"We've started to rebalance our business to focus a lot on the operational environment and producing the 75 percent solution and having a higher confidence in delivering on time," he said, adding that he recently reinstituted the position of chief operating officer to handle this.

But Stevens indicated the defense industry can only do so much to keep costs down on programs. Companies, he said, need stable requirements and continuous funding streams to help keep escalating costs at bay.

"Cost growth on programs is a function really of the same handful of things, and it's been that way probably since someone equipped George Washington with a musket," he said.