SALES

Raytheon's challenges remain

By Ross Kerber, Globe Staff

Sales 100 All the charts

aytheon Co.'s sales of $16.8 billion made it the largest company headquartered in Massachusetts last year, as measured by revenue. But it ended 2002 as the fourth-largest US defense contractor, down from third place, its rank before Northrop Grumman Corp. purchased some of TRW Inc.'s assets.

The drop in rank summed up the kind of year Lexington-based Raytheon had in 2002. It made its operations profitable again, but saw its share price end up at about $32 -- roughly where it stood at the start of the year.

The problems muddled what could have been a banner year. Raytheon is best known for its Tomahawk cruise missiles, radar, and smart bombs, widely used in the invasion of Iraq. The company believes it stands to gain more than most other defense contractors from the Pentagon's increased emphasis on "network-centric warfare," such as bombs guided by satellite signals. But surprisingly to some, the war hasn't had an obvious effect on Raytheon's revenue. That's because orders for bombs don't make up a large percentage of the company's total business.

In its war budget, for instance, the Bush administration sought $3.7 billion to replenish the supply of weapons fired in Iraq, including more than 700 Tomahawk cruise missiles that cost $500,000 to $1 million apiece.

But other arms makers, such as Textron Inc. in Providence and Boeing Co. will get a piece of the pie, too.

Moreover, potential foreign customers for Raytheon's high-profile Patriot missile defense system say they're waiting for more information about its performance in Iraq, including details about several friendly-fire incidents.

Raytheon president William Swanson, who will become chief executive in July, succeeding Daniel Burnham, said the company's defense business is on track. Swanson said he will continue Burnham's strategy of focusing on high-margin businesses, such as sensors and missile defense. The construction projects will be done this summer, he vowed, and the civilian aircraft unit faced up to a downturn in the industry sooner that its competitors did.

"I feel good about our growth and the success we're helping our customers achieve and see no need to change our course," Swanson said April 23, just after he was named to succeed Burnham.

Ross Kerber can be reached at kerber@globe.com.

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