Raytheon wins auction for Hughes Aircraft

Raytheon Co. last week came away the winner of a $9.5 billion bidding war for Hughes Aircraft Co. a division of Hughes Electronics Corp. In outbidding Northrop Grumman Corp. the sole competing bidder in the last week of negotiations Raytheon will pick up a full cache of federal business even beyond the lucrative missile and Defense electronics markets.

During the last several years Hughes has won major information technology contracts at the Defense Department the Federal Aviation Administration and NASA (see chart Page 40). Raytheon estimated the resulting company - under the name Raytheon Co. - will be worth $21 billion in annual revenue.

Existing programs will remain under their current management until the company begins sorting out its holdings after the deal is finalized in mid-1997 company executives said. Federal agency officials said they would be monitoring the transaction and its impact on their programs.

Although the Defense electronics business has the highest visibility executives at Raytheon identified Hughes programs such as the personal computer and workstation contracts at the Air Force and the air traffic control programs at the FAA as key components of the transaction. These and most other IT programs at Hughes have been managed recently by the company's Information Systems division.

In particular Hughes' air traffic control capabilities represent an important strategic acquisition Raytheon said. "We would consider ourselves the pre-eminent worldwide air traffic control [contractor] after the consolidation " said David Dwelley vice president of strategic business development at Raytheon. "The combination really gives us an end-to-end capability we didn't have before."

Hughes was a subcontractor on Raytheon's winning bid for the FAA's billion-dollar Standard Tracon Automation Replacement System program awarded last year.

The FAA declined to speculate on the impact of the merger. "Regardless of the corporate name or logo we would expect any of our contractors to fulfill the terms of the contract we have just as they are now " a spokesman said.

The Air Force Workstations and Desktop V contracts that Hughes won last year represent new territory for Raytheon. "I would say we are very attracted to that [market] " Dwelley said. "It serves many of the customers we serve as well."

Lt. Col. Andrew Gilmore director of contracting at the Air Force's Standard Systems Group said he is not anticipating any difficulties with Raytheon's acquisition of Hughes. SSG manages such contracts as Hughes' Desktop V award.

"Raytheon is well-known for its experience in government contracting and procurement " Gilmore said. Still SSG will be looking out for its customers' interests and will watch the Raytheon transition "like a hawk " he added.

A spokesman for Hughes said it will not be known exactly how Hughes' computer-related businesses will be aligned under Raytheon until a Hughes-Raytheon transition team meets to discuss business issues.