Raytheon Co., the world’s largest
missile maker, said third-quarter profit dropped 91 percent and
slashed its full-year forecast because of production delays at
its unit that makes electronics equipment for the battlefield.
Profit from continuing operations fell to $21 million, or 5
cents a share, from $228 million, or 56 cents, a year earlier,
the Lexington, Mass.-based company said in a statement.
Sales rose 7 percent to $4.38 billion from $4.09 billion.
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Chief Executive William Swanson, who took over the company
in July, vowed in a June interview to restore investor trust and
lift profits by keeping projects on time and on budget. Raytheon,
under Swanson’s predecessor Daniel Burnham, had seen its share
price drop by half since 1999 amid cost overruns on two power-
plant projects.
“It’s pretty much a disaster,” said Robert Stallard, an
analyst at Banc of America Securities. “People are trying to get
more bullish on the stock and think that the problems are behind
them when, out of the blue, another unit blows up. This is going
to undermine people’s confidence in the management.”
Stallard rates the shares ‘sell.’ Parent Bank of America
Corp. held 1.28 million shares of Raytheon at the end of June.
Raytheon said profit this year will fall to $1.29 to $1.31 a
share. It had previously forecast $1.70 to $1.80. It was expected
to have profit of 43 cents last quarter and $1.74 in 2003, the
average estimates of analysts surveyed by Thomson Financial.
Shares of Raytheon, the fourth-largest U.S. defense contractor, had earlier dropped 8 percent to
$25.45, the biggest drop since July 2002.
Reductions and delays in deliveries, negative developments
on contract negotiations, performance “deterioration” and
continued technical issues at Raytheon’s Network Centric Systems
business hurt results, the company said.
The unit makes radar, radios and sensors that help soldiers
communicate on the battlefield, and systems that link all of the
equipment. Its sales dropped 27 percent last quarter to $556
million. The unit had an operating loss of $138 million, compared
with income of $63 million a year earlier.
Network Centric Systems first reported production delays in
the second quarter. Swanson said then that the problems stemmed
mainly from 10 of the 2,500 programs overseen by the unit.
Raytheon said that third-quarter results included
$187 million of increased costs related to the Network Centric
unit, including $147 million for the previously identified 10
programs and $40 million for other parts of the business.
Bloomberg News
