Boeing reorganization targets defense

Boeing Co. has merged its communications, defense, government, intelligence and space capabilities into a $23 billion business.

The company announced the creation of Integrated Defense Systems July 10 at a news conference in Chicago.

"It shows the direction that major defense contractors are going now trying to develop systems of systems capabilities," said Philip Finnegan, a senior analyst with Teal Group Corp. in Fairfax, Va. "That's a general trend in the industry."

The move has two main objectives: forming a single unit and providing a direct line to customers, said Phil Condit, Boeing's chairman and chief executive officer.

"We are making a significant organizational change really focused on the future," Condit said. "It is designed to address a changing business environment.

"A lot of what the military is doing now is trying to build integrated systems," he continued.

Jim Albaugh will serve as president and CEO of the venture, with headquarters in St. Louis and 78,600 employees worldwide. Albaugh previously led Boeing's space and communications unit.

The new organization "parallels quite closely Lockheed Martin [Corp.] and Northrop Grumman [Corp.], and I think it will be able to compete more effectively," said Paul Nisbet, an aerospace analyst with JSA Research Inc. in Newport, R.I.

The reorganization follows recent wins for Boeing that include the Army's $856 million Joint Tactical Radio System and $154 million Future Combat System (a team effort with Science Applications International Corp.).

"These wins validated our network-centric strategy of integrating the various elements of the battlespace to provide real-time connectivity and situational awareness," Condit said in a news release distributed before the conference. "In this new organization, we have assembled the necessary communications, intelligence, surveillance and reconnaissance capabilities as well as platform knowledge to be the pre- eminent government systems company in the world."

The change is effective immediately with an anticipated six-month transition period, Condit said at the conference.

"This is less of a cost synergy play [and] more of a strategic direction," he added.