Rockwell Collins, a spinoff of Rockwell Automation, makes aviation electronics and communication equipment for commercial and military aircraft. The company boasts that nearly every commercial cockpit contains something made by Rockwell Collins. It also provides flight simulation and training, MRO services, navigation, and surveillance systems. The company has two primary segments: Commercial Systems (avionics and in-flight entertainment systems for commercial aircraft) and government systems (airborne/ground/shipboard communication systems with military applications and overhaul services). It serves more than two dozen countries, but makes the majority of its sales in the US.
Rockwell Collins operates through 60 locations in some 25 countries including France, Canada, Germany, Japan, Australia, China, India, Italy, Sweden, Spain, Singapore, Brazil, the United Arab Emirates, Saudi Arabia, the UK, and the US. Rockwell Collins makes about 70% of its sales in the US.
The government systems segment (55% of total sales) provides products for a variety of uses but they all have the common theme of design for use under rugged conditions constrained by challenges in relation to size, weight, and power. These products include satellite communications systems, handheld navigation devices, flight controls, helmet-mounted displays, and training systems.
The company's commercial systems segment (45%) provides systems and products for the original manufacturing, retrofitting, and upgrading of aircraft. Products include the Pro Line Fusion integrated avionics system, cabin management systems, head-up guidance systems, primary actuation systems, and simulators for crew training. The segment serves a range of customers, from the biggest aircraft makers in the world to owners of individual aircraft. Aftermarket products are sold through distributors and to regional airline operators.
Sales and Marketing
Rockwell Collins markets its systems, products and services directly to government systems and commercial systems customers through an internal marketing and sales force. The company also utilizes a worldwide dealer network to distribute its products and international sales representatives to assist with international sales and marketing.
The US government accounts for 38% of sales. Customers include the Department of Defense, US Coast Guard, civil agencies, defense contractors, foreign ministries, commercial air support manufacturers, airlines, and jet operators.
After recording record-high revenues of $4.81 billion in 2011, Rockwell Collins saw its net sales fall to $4.73 billion in 2012. Profits decreased 4% from $634 million in 2011 to $609 million in 2012.
The decrease in net sales for 2012 was attributed to a reduction in government systems sales primarily due to a 40% drop in surface solutions products and a 22% decrease in navigation products. The decrease was slightly offset by an increase in air transport aviation electronics (9%) and business and regional aviation electronics sales (6%).
The drop in profits was due to the lower revenues coupled with the absence of recorded income from discontinued operations.
Joint ventures are an important element of the company's strategy for growth. It maintains 50-50 JVs with BAE Systems for Data Link Solutions (serving the worldwide data link market); Elbit Systems for Vision Systems International (helmet-mounted cueing systems for the military fixed-wing market); Honeywell International for Integrated Guidance Systems (weapons guidance and navigation products); and Quadrant Group for Quest Flight Training (aircrew training for the UK Ministry of Defense). Throughout 2012 it established additional joint ventures with airlines and research institutes in the important country of China.
The company anticipates a slight decline for its government systems segment but is more optimistic about commercial systems in 2013, when a year-over-year increase of 2% to 4% is expected. Compensating for the decline in sales for government systems that is attributable to cuts in the US defense budget, Rockwell Collins has initiated cost-savings measures and a restructuring plan that matches resources more optimally for the new defense landscape.
One advantage and risk of the company's standard operating procedure is the fixed-price contract, which accounts for about 90% of sales. This practice creates costs savings, but it can also bring cost overruns if initial cost estimates prove to be wrong.
Capital World Investors owns 11% of the company.