ISIS, Iran Fueling Growth in Missile, Bomb Market, Says Raytheon CEO

FARNBOROUGH, England — The American-led airstrike campaign against the Islamic State group and the global demand for missile defenses have Raytheon positioned for solid growth in 2016, the firm’s top executive said.

Raytheon is projecting a revenue increase of 3 to 5 percent, or as much as a $1.1 billion, from its $23.3 billion in sales last year, Thomas Kennedy, the company’s chairman and chief executive, said in an interview Monday at the Farnborough Air Show.

“A large part of that is the missile growth [but] it’s across all of our businesses,” Kennedy said. “All of our businesses are growing.”

Raytheon makes the popular Patriot missile defense interceptors, as well as air-to-ground missiles and air-to-air combat missiles fired by fighter jets. Allies in the Middle East have been on a missile defense spending spree to guard against Iranian rockets, purchasing both Patriot and another system made by competitor Lockheed 

“The insurgency wars that are going on are essentially providing significant demand for precision weapons,” Kennedy said. “And the concerns relevant to ballistic missile threats is creating demand for missile defense weapons. The demands are there and we’re off filling them.

“It has increased the manufacturing tempo and we’ve been working through our supply chain and in our factories to ensure that we can meet that demand and so far we have been,” he said.

Missile defenses have also been in high demand in Asia as North Korea continues to test mobile and sea-based ballistic missiles. The most recent of those tests came last Friday when Kim Jong-un’s regime launched a ballistic missile from a submarine in the Sea of Japan, the Pentagon said.

“Our international pipeline has never been so strong,” Kennedy said of the demand for the company’s products overseas.

The company has been making incremental improvements to its missile defense portfolio including new Patriot seeker and gallium nitride radar, which track ballistic missiles. The Pentagon has also been looking at ways to use Patriot against other types of targets, such as cruise missiles and aircraft.

“The tests that we’ve had here in the last couple of years, relative to the enhanced kill vehicles to the ballistic missiles themselves, have shown that we have a solid foundation in terms of missile defense for the United States,” Kennedy said.

The company is also doubling down in its cybersecurity business. The company in 2015 purchased Websense for $1.9 billion and has since rebranded the firm as Forcepoint. “In less than a year, we created a $600-million-revenue commercial cybersecurity business,” Kennedy said.

That firm works hand-in-hand with Raytheon’s government and defense cybersecurity unit. Last year, Raytheon won a $1 billion deal from the U.S. Department of Homeland Security to protect government networks. The firm is also providing the cybersecurity services for an entire nation, Kennedy said. Company officials declined to name the country.

And despite U.S. defense spending caps, known as sequestration, the company’s products have been in high demand by the Pentagon. A recent report by the data analysis firm Govini showed many of Raytheon’s products and technologies are dominant in the markets the Defense Department is eying as part of its “third offset,” an initiative to build technology and weapons for the wars of the future.

When investors visiting Raytheon’s factories ask “How’s business”? Kennedy tends to respond like this: “Did you notice you couldn’t get a parking space?”

That was the case when Defense One toured Raytheon’s Patriot missile defense radar factory in Andover, Massachusetts, earlier this year. Company employees say the same is true in Tucson, where the company builds missiles.

“Where else can you find a factory in America that you can’t get a parking space?” Kennedy said.

CORRECTION: This story originally said Raytheon received a $1 billion deal to protect Department of Homeland Security networks. The contract is to protect all federal government networks.