Raytheon to sell units, raise $500 million

Company seeking to pare debt, focus on profitable divisions

February 09, 2000|By BLOOMBERG NEWS

NEW YORK -- Raytheon Co., the No. 3 U.S. defense company, said yesterday that it plans to sell $500 million of businesses this year as it cuts debt and focuses on more-profitable units.

The company also told analysts and investors at a conference in New York that it expects revenue to rise an average of 4 percent to 6 percent annually from 2000 to 2004 and earnings to rise 10 percent to 15 percent in the same period. Raytheon said it expects revenue to rise 1.5 percent this year to $20.3 billion and net income to rise to $580 million. The company also expects to reduce debt to $9 billion from $9.5 billion.

Lexington, Mass.-based Raytheon is concentrating on its main businesses after warning in October that sales and profit last year and this year will be less than forecast, triggering its biggest stock drop in at least two decades. The shares have fallen about 61 percent in the last 12 months.

Raytheon employs about 550 at its military electronics facility on Joppa Road in Towson, Md., which the company bought from Allied Signal Corp. in September 1998. The plant makes friend-or-foe identification devices for military aircraft.

"The single most important thing for Raytheon this year is addressing the operational and control issues that surfaced in 1999," Chief Financial Officer Franklyn Caine said. "We understand the depths of those problems."

Last month, the company agreed to sell its flight-simulation and training division to L-3 Communications Holdings Inc. for $160 million. In November, Raytheon said it would sell a slumping microelectronics division to closely held Imrex LLC.

Raytheon has about $700 million of contracts that it receives zero margin on, the company told analysts and investors. Raytheon is focusing on its main businesses, which include defense electronics, missile systems and air defense systems like the Patriot missile and its aircraft production and integration business.

The meeting "was pretty upbeat," said Prudential analyst Todd Ernst. "I think they have their arms around most of the issues. We're probably not going to see results until the second half of this year. There needs to be more demonstration of execution before people really buy into it."

Raytheon plans to add about 6,000 employees this year.

Raytheon's Class B shares fell 6.25 cents yesterday to $21.5625 on the New York Stock Exchange. In July, the shares were trading for more than $76.

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