) has decided to reorganize its business through segment
realignment, announcement of key executive roles and job cuts.
The restructuring would aim to streamline operations, increase
productivity and achieve stronger alignment with customers'
preferences. The restructuring will be effective from Apr 1,
Currently, Raytheon's operations are classified into six business
segments: Integrated Defense Systems (IDS), Intelligence and
Information Systems (IIS), Missile Systems (MS), Network Centric
Systems (NCS), Space and Airborne Systems (SAS), and Technical
Services (TS). However, post re-alignment, this number will
come down to four.
Intelligence and Information Systems and Raytheon Technical
Services businesses will combine to form a new segment called
Intelligence, Information and Services. Parts of the Network
Centric Systems business will be added to Integrated Defense
Systems, Missile Systems, Space and Airborne Systems and the
newly formed Intelligence, Information and Services. Therefore,
effective Apr 1, 2013, the company will operate through four
business segments, namely, Intelligence, Information and
Services, Integrated Defense Systems, Missile Systems, and Space
and Airborne Systems.
Moreover, Dr. Thomas A. Kennedy has been elected to the position
of executive vice president, chief operating officer who earlier
served as vice president, Raytheon Company, and president of
Integrated Defense Systems. Also, in conjunction with the
business consolidation, Swanson, Raytheon's Chairman and Chief
Executive Officer announced new roles for members of the Raytheon
As a result of the consolidation the company expects to reduce
the work force by 200 employees out of Raytheon's 67,800
employees. Therefore, this would not generate significant
severance charges, thereby having no effect on the full year 2013
The company expects the new structure to drive productivity,
agility and affordability in a challenging defense and aerospace
market environment. It expects consolidation to bring in savings
of $85 million on an annual basis.
Other big names in the defense space have also resorted to
cost-cutting measures, layoffs and structural changes to cut
overhead costs and maintain profits. In Nov 2012,
The Boeing Company
) had announced a major restructuring of its defense division and
decided to cut 30% of management jobs in comparison to 2010
levels, closed facilities in California and consolidated several
business units to cut costs. In Oct 2012,
Lockheed Martin Corporation
) had announced the restructuring of the organization in order to
streamline its operations while enhancing customer alignment.
Based in Waltham, Mass., Raytheon Company is a technology and
innovation leader specializing in defense, homeland security and
other government markets throughout the world.
Looking forward, Raytheon enjoys strong order bookings and order
backlog, an improving balance sheet, growing cash flow, and
operational improvements. However, we remain concerned about
defense cutbacks, the fate of high-cost programs, risks related
to key project executions and order cancellations. The company
presently retains a short-term Zacks Rank #3 (Hold).
In the near term, we would advise investors to accumulate its
short-term Zacks Rank #2 (Buy) peer
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