Raytheon

The newest partners have paired off in the defense industry's consolidation waltz, with Raytheon Co. announcing a $2.95 billion cash deal yesterday to purchase the defense operations of Texas Instruments Inc.Analysts said the pickup gives Massachusetts-based Raytheon an advantage in the drive to assemble one more big defense company in the shadow of the industry's two superpowers, Lockheed Martin Corp. of Bethesda and Boeing Co. of Seattle.The next to be sold should be GM Hughes, which is on the block at a reputed price of $8.5 billion.

Wall Street describes it as a "dream" deal: Raytheon Co. splits itself into pieces, and investors walk away with billions of dollars in proceeds.Such a break-up could enable Raytheon to get stronger by merging with another defense company, and would also unlock hidden value in its commercial assets, which include engineering and construction services, business jets and appliances.Under some analysts' dream scenario, Raytheon would merge its defense business with Hughes Aircraft Co. or another defense contractor, spin off part of its Engineers & Constructors division to shareholders, conduct a public stock offering for its Beech Aircraft unit and sell its Amana appliance line to a competitor.

Defense Secretary William J. Perry, a bookish-looking man with the public demeanor of a slightly distracted bureaucrat, walked into a Pentagon briefing room last month and set off a bomb in American industry.His announcement of two finalists to build the fighter plane of the future drove the third-place company, McDonnell Douglas Corp. of St. Louis, into its recently announced merger with Seattle's Boeing Co.This is something like the CBS television network surrendering itself to ABC, a dramatic reconfiguration of an edifice that seemed too big for such change.

Even the Air Force can't resist going "Star Trek" over its new weapons system."It's in my sights, Scotty. Prepare photon torpedoes!" is the giddy tag line to an otherwise Spockish newsletter from the military lab working on the weapon.The analogy is pretty hard to resist when it comes to the airborne laser.Mounted in a turret on the nose of a 747, the airborne laser would fire a burst of light at a Scud missile just as it broke through the clouds and knock the warhead back down on Saddam Hussein or whoever sent it up.On Tuesday, the Pentagon will choose from two teams of companies for a billion-dollar, five-year sweepstakes to prove that the weapon can be built.

Raytheon Co., whose long record of steady profit growth has been one of the surest bets on Wall Street, surprised investors yesterday by announcing that its third-quarter operating income will be significantly lower than last year's because of problems in two of its four core divisions.The diversified giant based in Lexington, Mass., called the shortfall a temporary "bump in the road," and said it expected to report higher earnings per share for the quarter and for the year.But such assurances were no comfort to investors, who, after bidding up Raytheon stock to a yearly high earlier this week, quickly dumped it yesterday.

The Lockheed Martin Corp. of Bethesda slipped a notch yesterday in its dominance of the nation's air traffic control industry, losing out to Raytheon Co. on a potential $1 billion job with the Federal Aviation Administration.The contract involves a decade's worth of work replacing an aging computer system that tracks planes near commercial and military airports."We're understandably disappointed," said spokeswoman Judy Gan of Lockheed Martin's Air Traffic Management Division in Rockville.

It's nail-biting time for employees at Westinghouse Electric Corp., including its 8,500 workers in Maryland.There is widespread speculation that the Pittsburgh-based company will announce the sale of as many as four of its operating divisions this week to help help pay for its $5.4 billion acquisition of CBS Inc.According to analysts who follow the company, Westinghouse may announce the sale of major assets as early as this evening.Top executives of Westinghouse, including Chairman and Chief Executive Michael H. Jordan, are scheduled to meet with securities analysts tomorrow morning in New York.

Raytheon buys E-SystemsRaytheon Co. yesterday agreed to buy E-Systems Inc. for $2.3 billion, creating a $12 billion company and hastening the consolidation in the defense industry.Raytheon's purchase price for E-Systems was $64 a share, 41 percent over its closing price of $45.375 Friday. E-Systems shares gained $18.625 yesterday on the New York Stock Exchange, to close at $64. Raytheon was down $1.125, at $71.75.Dallas-based E-Systems makes electronic systems for commercial and defense applications.

There was more bad news yesterday for workers at the Westinghouse Electronic Systems Group in Linthicum.The General Accounting Office has denied a challenge that Westinghouse filed against the Army's award of a contract to Lexington, Mass.-based Raytheon Corp. The contract, awarded in September, was for the production of a ground-based radar system to be used with a missile defense system similar to the Patriot.In its filing, Westinghouse argued that its bid for the $614.7 million contract -- the first phase of a pact that could have led to billions of dollars in new business over the next decade -- was 40 percent lower than Raytheon's.