Raytheon's Problems May be Due to Y2K

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When I heard that Raytheon was going to have a bad rest of 1999 and all of 2000 due to their falling behind on meeting order schedules, I immediately thought of Y2K. I believe that supply chain problems will be the first publicly noticeable sign of Y2K. The products that Raytheon is making are older ones that they have been manufacturing for years. These products also have long lead times. If they and their suppliers are falling behind because of Y2K inventory problems, this would explain the sudden inability to manufacture efficiently the same products that they have been making for years.

-- Mr. Adequate (mr@adequate.com), October 12, 1999


that could be one explanation. I can think of at least one or two others. The supplier issue may be more closely tied to obseleting old process technologies which are not as profitable or not growing in this age where revenue and growth are king or which are simply incompatible with processes - i.e. the equipment and geometries used in making the chips are so far apart- old compared to new -that they don't work together.

The redesign of systems which are still needed but for which parts are no longer available is a non-trivial effort. In addition, where defense was once a key business of several component manufacturers, that has been surpassed - in a big way - by PC and communications products which promise continued growth, high margin, and economies afforded mass production. Taking on custom asics for very low volume is no longer appealing at any price compared to other opportunities. The reduction in defense itself stands on its own as good reason for a shortfall.

There is a y2k footnote at work in the obselesence equation which may satisfy the GI's - although it is not a factor to impact us at year end. One of the reasons several component suppiers encountered which aided their analysis was that the design system sw used to design the products a Raytheon might use was not compliant. Newer versions were available but to convert all the libraries from old systems to new ones for the specific cells used in the old designs and dedicate even more resource to such opportunities did not enhance ROI analysis. So the asics would have to be done with new libraries targeted at new processes (which are also much more dense) and besides redesign would require qualification time & effort.

-- toptxs (toptxs1@toptxs.com), October 13, 1999.

It is also likely that they are experiencing some production setbacks because of disruption of the supply of semiconductors from Taiwan after the earthquake, which was really just sort of a mini-model of the Y2K scenario.

Raytheon should do well over the next few years though because of a big defense budget just approved. Defense contractors are going to start getting a lot of business from Uncle Sam. If I were a player in stocks I'd wait until the market bottoms out and put some money into these types of companies.

-- @ (@@@.@), October 13, 1999.


] Gee, maybe they should have used Raytheon's Year 2000 Professional Services group....

-- King of Spain (madrid@aol.cum), October 13, 1999.


Maybe they did.

-- no talking please (breadlines@soupkitchen.gov), October 13, 1999.

I think that the only Raytheon problem that can be compared to the Y2K problem is that only good news flows up to higher managers, while the bad news gets stiffled. The CEO's press statement said that the earnings projections turned out to be too optimistic because that's basically what his subordinates had told him. Of course, none of the subordinates wanted to stand up and say, "Sorry sir, but there's no way we can make these budget projections", because it would be "career-limiting". I believe that Y2K compliance statements are being treated the same way in most of corporate America. "Sure our systems will be ready for Y2K! We're on track!", say the corporate managers, while the worker bees are frantically attempting to find and fix all of the potential problems. Only 80 days until we find out for sure...

-- Ray Theist (Ray.Theist@defensecontractor.com), October 14, 1999.

Did Raytheon end up with Hughes Missile Systems' contracts? If they did, they have by now discovered some very nasty truths about some of them, like the fact that important parts of some mission-critical manufacturing systems were written in some truly weird control languages. No, not Forth - Forth is common as mud compared to some of these beauties. Good luck making any mods of any kind.

Many analysts are wondering why Raytheon is struggling when the US has been using cruise missiles like bottle rockets on the 4th. Well, you can't sell what you can't build.

-- Mac (sneak@lurk.hid), October 14, 1999.

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