Boeing Company, The

Company Profile
Publication Date: 19 Jun 2009
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................................................Boeing Company..............5 Boeing Company............................ The TABLE OF CONTENTS TABLE OF CONTENTS Company Overview.........................4 SWOT Analysis.................................................................................4 Key Facts........... The © Datamonitor Page 3 ......................................................................................................

satellites. a decrease of 34. The © Datamonitor Page 4 . The decline in revenues was primarily due to lower revenues from commercial airplanes segment.Boeing Company. The 100 North Riverside Plaza Chicago Illinois 60606 1596 USA 1 312 544 2000 Phone Fax Web Address http://www.950 million during FY2008. missile defense. It is headquartered in Chicago. development. military aircraft. human space flight. KEY FACTS Head Office Boeing Company. The company recorded revenues of $60.4% compared to 2007.672 million in FY2008. and launch systems and services. sale and support of commercial jetliners.909.0 (USD Mn) Financial Year End Employees New York Ticker December 162. The company operates in the US and Europe. manufacturing.boeing.909 million during the financial year ended December 2008 (FY2008). a decrease of 32. a decrease of 8. The net profit was $2.2% compared to 2007. The Company Overview COMPANY OVERVIEW Boeing is engaged in the design.200 Revenue / turnover 60.200 BA Boeing Company. Illinois and employs about 162.3% compared to 2007. The operating profit of the company was $3.

The company is one of two major manufacturers. Boeing has greater scale in terms of revenues. The company has customers in more than 90 countries around the world and is one of the largest US exporters in terms of sales. missile defense.Boeing Company.174 million). Boeing Company. human space flight. General Dynamics ($29. changes in the budgetary priorities of the US Government could directly affect the company's operating results. which is significantly higher than that of its competitors such as Raytheon ($23. However. manufacture. and launch systems and services. satellites. human space flight and launch systems and services. The © Datamonitor Page 5 . Strengths Large scale of operation Strong association with Federal Government Focus on R&D Strong order backlog Opportunities Inorganic growth Rising global defense spending Growing demand for commercial airplanes Weaknesses Weakening financial performance Legal proceedings Sluggish performance in key segments Threats Change in the US budgetary priorities Issues arising from fixed-price contract Forecasted global recession in 2009 Labor market woes in the US Strengths Large scale of operation Boeing is the global market leader in design. equipped to produce aircraft capable of carrying more than 100 passengers for the worldwide commercial airline industry. compared to other players in the market.300 million). development. The SWOT Analysis SWOT ANALYSIS Boeing is engaged in the design. missile defense. Boeing is one of the leading producers of commercial aircraft and offer a broad spectrum of commercial jetliners designed to meet passenger and cargo requirements of both the US and non-US airlines. The company’s large scale of operation enhances its market penetration opportunities and gives it substantial bargaining power. military aircraft.909 million in FY2008. sale and support of commercial jetliners. In addition. It has customers in more than 90 countries around the world and is one of the largest US exporters in terms of sales. manufacturing. development. and the second-largest defense contractor in the US. The company generated total revenues of $60. military aircraft. sale and support of commercial jetliners. The company is one of leading producers of commercial aircraft. satellites.

7 million). In June 2009. respectively. In the same month. development and related test activities for defense systems. supportability. Strong association with Federal Government Boeing has a strong association with the US federal government. The company’s large scale of operation enhances its market penetration opportunities and gives it substantial bargaining power. Other R&D efforts include upgrade and technology insertions.Boeing Company. Its 'other' business segment principally includes the engineering. In FY2008. The company’s IDS segment provides various research. and enhancing the capability and competitiveness of current product lines such as the F/A-18E/F Super Hornet. Boeing received a $48. and Lockheed Martin ($42.9 million contract from the US Navy in May 2009. Most recently. and NASA. Strong relationship with major customers enables the company to receive many new contracts and hence serves as a competitive advantage. In June 2009. EO&T is an advanced research and development organization focused on innovative technologies. Boeing received A-10 sustainment and integration contract from the US Air Force.927. Focus on R&D Boeing has a strong focus on R&D activities. F-15E Eagle. The company's total R&D expenses amounted to $3. advanced space and other company-sponsored product developments. R&D costs also include bid and proposal efforts related to government products and services and costs incurred in excess of amounts estimated to be recoverable under cost-sharing R&D agreements. new and derivative jet aircrafts. NASA and other defence customers.8 billion. The SWOT Analysis BAE Systems ($30. R&D expenditures involve experimentation. 2007 and 2006. reliability. the US government contracts accounted for 46% of total revenues of the company. maintainability. AH-64 Apache. and weapons effectiveness. Navy and Air Force. improved processes and the creation of new products. R&D investments in the Global Tanker Aircraft program represent a significant opportunity to provide state-of-the-art refueling capabilities. production. the company also received a $5. The company also engineered and deployed various products for the Army. design. Boeing received a contract from the US Army. The © Datamonitor Page 6 . NASA. CH-47 Chinook and C-17 Globemaster. Navy. and the Department of Homeland Security. with many of these customer relationships spanning more than three decades.2 million US Marine Corps contract to provide a solution for recovering disabled Mine Resistant Ambush Protected vehicles. The company has received significant contracts from these customers. including both commercial and military. Northrop Grumman ($33.9 billion and $3. among others. for development and testing of a Distributed Targeting system for the F/A-18E/F Super Hornet strike fighter. $3. development. modification and support services to the US Department of Defense (80% of IDS 2008 revenues). It tests complex and mission critical hardware and software systems used by the Army. operations and technology (EO&T) activities. The company played key roles in improving the performance.3 billion in FY2008. Boeing Company.887 million). The company deals with numerous US government agencies and entities. for future combat systems spin out production.731 million).

arising out of the conduct of the company’s business.Boeing Company. The strong order backlog assures stable revenue growth for the company and improves its market position. employment matters.2% over 2007.672 million in FY2008. The © Datamonitor Page 7 . The company has also recorded increase in order from majority of its segments.4%. In addition.5% and 4.5% and 8.4% compared to 2007. The net profit was $2. General Dynamics (12. Boeing was named as a defendant in a lawsuit filed in the US District Court for the Southern District of Illinois. intellectual property disputes and other personal injury claims. Continuation of this trend could reduce availability of resources to pursue growth plans.6 billion in FY2008. including commercial and contract disputes. Lockheed Martin (12% and 7. Global Positioning System.950 million during FY2008. during the same period.1% over 2007. Strong order backlog Boeing was successful in increasing new orders in its key segments. claims and legal proceedings. The company’s weak financial performance implies poor cost management and decision making by the management. The complaint alleges that fees and expenses incurred by Boeing Voluntary Investment Plan (the VIP Plan) were unreasonable and excessive. the commercial airplanes segment recorded a net backlog of $278. Legal proceedings The company is involved in various lawsuits. and Raytheon (11. Boeing has recorded weak margins as compared to its competitors. product liability claims. and leverage innovative communication concepts.2%). FCS. Similarly.2% and 7. an increase of 9. Weaknesses Weakening financial performance Boeing has recorded declining efficiency in terms of profits and margins. an increase of 8. environmental liabilities. an increase of 9.4% compared to the previous year. The company recorded operating profit of $3. and Transformational Satellite Communications System.4%). The company's strong focus on R&D enables it to gain an edge over its peers in a competitive marketplace by responding quickly to market dynamics. increase communications availability and bandwidth through more robust space systems. a decrease of 32. a decrease of 34. Key programs in this area include Joint Tactical Radio System.2% compared to 2007. not incurred solely for Boeing Company. In 2006.6%). respectively. the integrated defense segment of the company recorded an order backlog of $45.3% and 10. The total order backlog of the company stood at $323. The SWOT Analysis The company is also investing in the communications market to enable connectivity between existing air/ground platforms. Of the total backlog.5%). BAE Systems (10.3 billion in FY2008. which is considerably lower than its competitors.9 billion in FY2008. Its operating margin and net profit margin in 2008 were 6.

a decrease of 15. It could also adversely affect the image of Boeing. the out come of the litigation was not concluded. Further Telesat Canada (Telesat) and a group of its insurers served Boeing Satellite Systems International (BSSI) with an arbitration demand alleging breach of contract. the company received a formal dispute notice from New Skies alleging that BSSI breached the NSS-8 contract by failing to timely deliver a satellite in orbit and repudiating the replacement satellite option.7%. By mid 2008. the largest business segment of the company. Europe by 4. gross negligence and willful misconduct in connection with the constructive total loss of Anik F1. Boeing Company. accounted for 45. For instance.7%. This acquisition will expand the company’s presence in the military supply-chain and logistics command-and-control markets.6% compared to 2007. revenues from Boeing military aircraft segment declined by 1. logistics and knowledge management products and services will enhance the company’s global logistics support network.2%. China by 15. Tapestry Solutions' data fusion. network and space systems segment declined by 1. other than China declined by 28. and Africa by 45.9% of the total revenues in FY2008. Boeing has also recorded decline in revenue from few of its key markets. a model 702 satellite manufactured by BSSI. a decrease of 5. in November 2008. The arbitration hearing in this matter has been scheduled for November 2010.3% compared to 2007. Louis-based company whose engineering services and software systems help track and distribute equipment and personnel for the US Department of Defense.4%. In addition. a St.132 million in FY2008. The US. Revenue from this segment reached $28.8%. accounted for 61% of the total revenues in FY2008. Opportunities Inorganic growth Boeing has been expanding its portfolio of products and strengthening its position in the industry by acquiring assets or organizations.7%. Telesat and its insurers seek over $385 million in damages and $10 million in lost profits. Further.Boeing Company. the company’s largest geographical market. A continued weak performance in the key divisions will affect the overall financial position of the company.263 million. Further in December 2008. Boeing acquired Federated Software Group. In FY2008. and were undisclosed to participants. a San Diego-based company specializing in software systems and services. The SWOT Analysis the benefit of the VIP Plan and its participants. Boeing acquired Tapestry Solutions. Such legal proceedings could results in excessive expenditure for the company.9%. The © Datamonitor Page 8 .8%.This acquisition will accelerate the growth of the company's service and support business. Revenues from the US reached $37. and revenues from the Boeing capital corporation segment declined by 13. revenue from Asia. Commercial airplanes. Sluggish performance in key segments Boeing has recorded sluggish operational performance in its key segment. Oceania by 6. Further.

large defense budgets and good growth is forecasted in five countries: Russia. Together these countries are forecast to grow their budgets by a combined total of $55 billion between 2007 and 2010. Its clients include the defense departments of several countries. Taiwan and Australia). requiring approximately 28. the Middle East and Africa will represent a total of 13% of the market between 2006 and 2025. The increasing global defense spending could provide the topline growth for Boeing in the short to medium term. North America will make up for 26% of the total market. especially in military aircrafts. By that year. naval systems and defense electronics and avionics. yet the defense budget is expected to reach its peak in 2009 as growth is driven by the demands and consequences of the war in certain places around the world. The US President has requested the Congress for $515 billion as the defense spending for FY2009. The © Datamonitor Page 9 . The company is one of the leading producers of commercial aircraft and commercial jetliners. the President has requested an initial $70 billion in supplemental funding to support war efforts in Iraq and Afghanistan. The company is one of the leading defense contractors. The US approved $481. In addition to 2009 budget request. and 6% per year for cargo traffic based on projected average annual worldwide Boeing Company. two in South America (Brazil and Colombia). Netherlands and Greece). This acquisition will expand the company’s presence in the cyber and intelligence markets. six in the Asia Pacific region (Japan. South Korea.Boeing Company. Israel and Turkey). The largest market is projected to be the Asia-Pacific region. Growing demand for commercial airplanes The commercial airplane market is expected to grow to $2. Boeing's 20-year forecast reflects an average growth rate of 5% per year for passenger traffic. In June 2009. The global defense spending was more than $1 trillion in 2007 and has been rising in recent years. 777 wide-body models. China. Boeing acquired Digital Receiver Technology. and Europe will make up 25%. The SWOT Analysis In addition. Outside the US. around 80% of the defense spending comes from just 20 countries: seven in Europe (the UK. a company that provides hardware and software to federal government. India. Spain. These acquisitions will help the company to reinforce its market position in various segments as well as expand its geographical coverage. 767.4 billion in 2008 for the DoD's base budget. Rising global defense spending Global military expenditure and arms trade form the largest spending in the world in 2007. Deliveries to airlines in Latin America. the global commercial airplane fleet is expected to double as compared to the existing fleet size. China. South Korea. The company's commercial jet aircraft includes the 737 narrow-body model and the 747. The US remains the largest market by far. and Russia in the Commonwealth of Independent States. the company signed an agreement to acquire eXMeritus. a company that develops wireless surveillance products for government customers. three in the Middle East (Saudi Arabia.8% annually till 2027. This acquisition will help the company to expand its presence in the growing intelligence market.600 new commercial airplanes to meet the increasing traffic.8 trillion by 2027. with 36% of the $2.8 trillion market (as a result of the demand among Asian carriers in that market for more twin-aisle airplanes). It is projected that the passenger traffic would grow at 4. By 2010. France. Italy. India and Saudi Arabia. Germany.

The IDS segment of the company derived 50% of total revenue in FY2008 from fixed-price contracts. remain constant or shift to programs in areas where the company does not currently provide services. When making proposals for engagements on a fixed-price basis. The commercial airplane division with significant operations worldwide is well positioned to benefit from the growing commercial airline market. some of the engagements obligate the company to provide ongoing maintenance and other supporting or ancillary services with limitations on its ability to increase prices. Fixed-price contracts require the company to price contracts by predicting expenditures in advance. could make these contracts less profitable or unprofitable. Issues arising from fixed-price contract The company performs a portion of engagements on a variety of fixed-price contract vehicles.Boeing Company. intelligence and homeland security would adversely affect the company's future revenues and limit its growth prospects. program delays. For instance.400 new airplanes. or the DoD. increased pressure on operating margins and even net losses in certain cases. In addition. unexpected costs and unanticipated delays have caused to incur losses on fixed-price contracts. Threats Change in the US budgetary priorities Boeing is dependent on the US government for majority of its revenues. these losses have been significant. In 2008.2 trillion market for 29. On rare occasions. 2001 terrorist attacks. The © Datamonitor Page 10 . resulting in a slowdown in new programs. Any increased or unexpected costs or unanticipated delays in connection with the performance of fixed-price contracts. The future levels of spending and authorizations for such programs may decrease. From time to time. Boeing relies on its estimates of costs and timing for completing the projects. including delays caused by factors outside the company's control. could directly affect the company's operating results. including in the areas of national security. the US defense budget declined in the late 1980s and the early 1990s. A significant decline in the overall US government spending. and factoring in increased utilization of the worldwide airplane fleet and requirements to replace older airplanes. Based on long-term global economic growth projections. Changes in the budgetary priorities of the US Government. these spending levels may not be sustainable. primarily in connection with state government clients. the company projects a $3. The SWOT Analysis real economic growth rate of 3%. Boeing recorded a charge of $685 million for a reach-forward loss on its 747 program as a result of schedule delays and higher cost estimates associated with Boeing Company. While spending authorizations for defense related programs by the US government have increased in recent years and in particular after the September 11. and program cancellations. These reductions caused most defense related government contractors to experience declining revenues.

5 per hour from July 2007. which could strain relationships with customers and cause a loss of revenues that would adversely affect the company’s operations. Therefore.Boeing Company. Boeing has relationship with 14 different US labor organizations and seven different non-US labor organizations. further recession in global economy would harm the company’s business by adversely affecting its revenues. increased to $6. Boeing Company.5% in 2009 its lowest rate since World War II. which could adversely affect its business.4% in 2008. the tightening of credit in financial markets may adversely affect Boeing’s supplier base and increase the potential for one or more of its suppliers to experience financial distress or bankruptcy. The IMF forecasts. increased overtime. Further.1 per hour since 1997. The tightening of credit in financial markets adversely affects the ability of the company’s customers to obtain financing for significant purchases and operations. The SWOT Analysis the development of the 747-8 freighter and passenger derivative aircraft. 33% of the company’s employees are associated with certain labor associations like IAM.25 an hour effective July 2009. which was 3. that the global economy. cash flows and financial condition. with the US likely to slide into recession reflecting the damage from the financial turmoil in more than a half-century. Forecasted global recession in 2009 According to the world economy outlook of the IMF. The federal minimum wage rate in the US. These unions may also limit the company’s flexibility in dealing with its workforce. In recent times. Labor market woes in the US The US economy is facing a serious challenge in its labor market. Further. Work stoppages and instability in union relationships could negatively impact the timely production and development of products. The federal minimum wage rate is further expected to rise to $7. Further. tight labor markets. results of operations. the company has experienced a work stoppage in 2008 when a labor strike halted commercial aircraft and certain BMA program production and it may experience additional work stoppages in the future. the world economy will slow sharply in 2009 and in 2010. SPEEA and UAW. This could result in a decrease in or cancellation of orders for Boeing’s products and services as well as impact the ability of its customers to make payments. will lose considerable speed slowing to 0. which had remained at $5. Such problems in the future with fixed price contracts could have a negative impact on the company's revenues. government mandated hike in minimum wages and a higher proportion of full-time employees are resulting in an increase in labor costs. The © Datamonitor Page 11 . which could materially impact the company's results of operation.

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