Lockheed revamp seen as crucial first step
Contractor to form 4 core businesses in bid to stem losses

BALTIMORE -- Lockheed Martin Co.'s latest bid to refocus its operations won praise from Wall Street analysts. But they said the defense giant still has a ways to go to restore investor confidence.

Lockheed announced a major restructuring Monday, including changes in top management and a corporate realignment. The defense contractor also said it plans to sell eight businesses that employ 9,000 people.The businesses to be sold range from Sanders, a New Hampshire firm that makes "black box" data recorders in airplanes, and a Washington state firm that is cleaning up a nuclear reactor site. The businesses have combined annual revenues of $1.4 billion.

But some Wall Street analysts were disappointed that Lockheed, the No. 1 defense contractor in terms of sales, decided not to tackle problems in its aerospace business, which has experienced some costly setbacks and failures.

Lockheed, which had 161,000 employees and $26 billion in sales last year, will reorganize into four core businesses by the end of the year, replacing five semi-autonomous sectors that often competed with each other, said spokesman James Fetig. The reorganization will result in an unspecified number of layoffs at Lockheed's Bethesda, Md., headquarters.

"You're looking at a company trying to get its arms around what they own following the acquisition of several dozen companies over the last decade," said Christopher H. Mecray of Deutsche Bank Alex. Brown. "This is one of the steps they're taking to flatten out a structure that has kind of gotten out of control."

Changes were also announced at the top. Robert J. Stevens, vice president of corporate strategic development, will take over as chief financial officer, replacing Philip J. Duke, who is leaving the post after less than a year. Duke was named to an executive vice president post in a new division responsible for improving the company's efficiency.

Lockheed said the actions would not affect the earnings outlook for 1999 and 2000. Sale of the eight businesses is expected to offset the anticipated $1 billion in lost revenue.

Lockheed's reorganization effort, in the works since June, comes in the hopes of restoring sagging profits and investor confidence. The company reported a second-quarter loss in July of $41 million, due in part to launch failures.

Some analysts, however, said the company's reorganization did not go far enough to stem the company's losses.

"Our bottom line to our investors is it won't hurt, it might help a little, but it's not the solution to poor earnings performance," said Joseph Campbell of Lehman Brothers. "While this was a major strategic review, a major strategic review isn't what's going to make the market go up."