BAE Systems helped win the Battle of Britain in 1940 with its Spitfire and Mosquito fighters; today it is a leading military contractor and major foreign player in the US defense market. BAE's main operating groups -- electronic systems, cyber & intelligence, and platforms & services -- provide products and services that include electro-optical sensors, flight controls, commercial and financial security, ship repair and modernization, and aircraft. BAE's fighter aircraft include the Hawk, Tornado, and the next-generation Eurofighter Typhoon. North America is BAE's biggest market, with the US Department of Defense (DoD) its largest single customer.
Struggling with declining budgets in customer markets, the company weathered a year-over-year 2011 sales decline of 14%.
By segment, platforms & services (UK) fell 4%. Operations in this segment, which accounts for about 32% of revenue, include UK-based air and maritime activities, as well as such shared services as the Advanced Technology Center. Platforms & services (US) plummeted about 31%. This segment, which represents about 27% of revenue, is made up of the US-headquartered land & armaments business and operates additionally in the UK, Sweden, and South Africa.
Platforms & services (international), which operates in Australia, India, Oman, and Saudi Arabia, was down 12%. The segment, accounting for 20% of revenue, was busy with the first Saudi Typhoon squadron becoming operational and the launch of the first Royal Australian Navy Landing Helicopter Dock hull. Electronics systems -- representing 14% of revenue -- decreased about 11%. This segment's operations include electronic warfare systems, military and commercial digital engine and flight controls, and hybrid electric drive systems. Cyber & intelligence's 2011 year-over-year revenue rose 16%. The segment, accounting for 7% of revenue, handles cyber, government, and commercial security operations.
Amid sharp reductions in defense spending in both of the company's biggest markets, the US and UK, BAE Systems has launched a strategy that, besides focusing on electronics and cyber & intelligence, includes developing more export business to support its platforms segments and expanding its operations internationally.
Also to further its focus on core businesses, BAE Systems has disposed of several units in 2011, including Swiss-Photonics and BAE Systems' remaining share in Saab AB, as well as its business in regional aircraft asset management and its US-based composites structures and California-based advanced ceramics units. In 2012 the company sold its safety products business.
Also in 2011 BAE Systems settled a tough legal situation, agreeing to pay a fine of up to $79 million after reaching a civil settlement with the US Department of State for alleged violations of US defense export control regulations. The company's US subsidiary, BAE Systems, Inc., was not involved in the matter.
Mergers & Acquisitions
As a segment targeted for additional growth, cyber & intelligence has expanded recently with some major acquisitions. In 2011 BAE Systems acquired the intelligence service businesses of L-1 Identity Solutions, as well as ETI A/S, a Danish cyber and intelligence company, and Norkom Group, which provides anti-money laundering services. In other business, the segment enjoyed a boost in commercial sales for its Detica unit and invested in the UK Security Operations Center.
In September 2012 BAE Systems agreed to merge with European Aeronautic Defence and Space Company (EADS). However, the proposed $45 billion merger -- which would have created the largest global aerospace and defense player on the planet, both in total sales and market value -- was called off weeks later after it failed to pass European governmental and regulatory hurdles.