With US defence spending expected to rise under the Bush Administration, Raytheon is poised to exploit a defence electronics portfolio that is "second to none", says chairman and chief executive Dan Burnham. He highlights the company's strength in missile defence and intelligence, surveillance and reconnaissance (ISR) – areas expected to see highest growth.

The portfolio was not created without pain, but the financial turmoil which followed the spate of mergers that created today's Raytheon appears to be abating. "The disruption is behind us," says Burnham, adding that improved programme management lies behind the company's improved balance sheet.

Defence electronics accounted for 78% of Raytheon's $17 billion sales last year, and is expected to drive both revenue and earnings growth over the next five. With over 7,000 active programmes, "we have a breadth and stability that is unsurpassed in what is now a growth industry", Burnham says.

The company has $15 billion in missile-defence business in its five-year plan, but sees the possibility of another $15 billion as the USA moves towards layered defence against intercontinental, theatre and tactical missiles. "Missile defence is more than just missiles, and we are the undisputed leader," says Burnham. "The US is moving to a more complex missile-defence strategy, and more complex means better for Raytheon."

In the ISR arena, Raytheon "is one of three top players in sensor-to-shooter technologies", says Burnham, adding: "We want to be the one-stop shop in ISR." Key programmes include the UK Ministry of Defence's Airborne Stand-Off Radar battlefield surveillance system and the US Navy's Combat Engagement Capability sensor network – each expected to be worth more than $3 billion over 10 years.

Raytheon intends to focus on the fundamentals of programme execution and financial performance "forever", Burnham says, and to concentrate resources on defence electronics and "selected investments in emerging high-growth commercial areas – preferably with other people's money".

Acknowledging industry efforts to commercialise defence technology has had little success, Burnham says Raytheon is engaged in a disciplined process to evaluate and prioritise opportunities to work with partners bringing external investment and market expertise. "We will invest selectively in exporting technologies outside defence," he says.

Summing up, Burnham says: "If you believe in a growing defence budget; if you believe electronics will account for a disproportionate share of the growth; if you believe in Raytheon's breadth; and if you believe in our financial improvement; then we are a good investment."


Sales (2000)

$17 billion

Electronic Systems






Technical Services


Aircraft Integration




Growth target

10%+/year (EPS*)

Cashflow (2000)


Debt: capital


*earnings per share

Source: Flight International