Raytheon ("light of the gods") shines in the upper pantheon of US military contractors; the company regularly places among the Pentagon's top 10 prime contractors. Its air/land/sea/space/cyber defense offerings include reconnaissance, targeting, and navigation systems, as well as missile systems (Patriot, Sidewinder, and Tomahawk), unmanned ground and aerial systems, sensing technologies, and radars. Additionally, Raytheon makes systems for communications (satellite) and intelligence, radios, cybersecurity, and air traffic control. It also offers commercial electronics products and services, as well as food safety processing technologies. The US government accounts for a large portion of sales.
To support its customers worldwide, Raytheon serves defense and intelligence markets via five business segments: Integrated Defense Systems (IDS), Intelligence, Information and Services (ISS), Missile Systems (MS), Space and Airborne Systems (SAS), and Forcepoint (joint venture launched in 2015).
Having patented the first microwave more than 65 years ago, Raytheon is still developing and designing futuristic realities. The product that stands out most in the company's portfolio is the missile, however. As the world's #1 missile maker, Raytheon is a key player in US efforts to construct a comprehensive missile defense system.
Such systems need intercept vehicles, sensors, command and control systems, and systems integration expertise. Raytheon's precision engagement offerings include the company's missiles, as well as radars, data links, targeting and warning systems, and lasers. In recent years the company has released an air and missile defense systems product line, which includes the Standard Missile-3, the Exoatmospheric Kill Vehicle (EKV), and branded development programs.
Raytheon maintains offices in nearly 20 countries and has established global companies to serve customers Australia, Germany, the US, and the UK. The company sells products and services to customers in 80 nations, although the US accounts for about 70% of net sales.
Sales and Marketing
The US government accounted for 68% of Raytheon's sales in 2015. While it consistently counts among its customers the US Department of Defense (DoD), the Federal Bureau of Investigation (FBI), and NASA, as well as members of the US military and US intelligence communities, Raytheon also has some key international customers. The company has contracts with South Korea to provide air and missile defense systems, with Japan for training, Saudi Arabia for surveillance systems, and Australia for joint standoff weapons. Other main global clients include Finland, Germany, Taiwan, and the United Arab Emirates.
After decreasing for several years, Raytheon's revenue climbed by 2% from 2014 to 2015. The growth was fueled by increases in its MS and IDS segments and positive revenue from Forcepoint.
IDS sales in 2015 climbed primarily due to higher net sales from an international Patriot program awarded in the second quarter driven by program activity and the recognition of previously deferred pre-contract costs. MS sales climbed in 2015 due to higher net sales on certain air and missile defense programs, and Forcepoint sales spiked due to a previous acquisition.
After steadily increasing the last several years, Raytheon's profits fell 8% from 2014 to 2015. This was attributed to a spike in general and administrative expenses related to acquisitions. In addition, Raytheon's operating cash flow jumped 8% from 2014 to 2015 primarily due to a decrease in pension contributions.
Raytheon's diverse product lineup puts it in a better position to weather budget cuts than some of its competitors that handle a limited number of defense products and services. Its business is also contingent, to a great extent, on the federal defense budget. With the US budget deficit hitting an all-time high in recent years, the present administration is struggling to prioritize among such spending initiatives as defense, homeland security, health care reform, and alternative energy development.
Mergers and Acquisitions
The company's cybersecurity business has been getting a lot of attention of late, primarily through multiple acquisitions, which reflect Raytheon's general strategy for building its operations and growing its customer base.
In 2015 Raytheon created Forcepoint, a new cybersecurity joint venture company (with Vista Equity Partners), in order to extend its cyber capabilities into the commercial markets. At the time, Forcepoint purchased Websense, a provider of advanced threat protection and data theft prevention services across web, email, cloud, and endpoint infrastructure, for $1.9 billion. Raytheon combined Websense with Raytheon Cyber Products, formerly part of its IIS segment.
Also in 2015, Raytheon augmented its MS segment when it acquired Sensintel, a privately held provider of unmanned aircraft systems products to the intelligence and special operations markets.