Boeing sees strong continued commercial demand for satellites

COLORADO SPRINGS, Colo. Wed May 21, 2014 11:25am EDT

The Boeing logo is seen at their headquarters in Chicago, April 24, 2013. REUTERS/Jim Young

The Boeing logo is seen at their headquarters in Chicago, April 24, 2013.

Credit: Reuters/Jim Young

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COLORADO SPRINGS, Colo. (Reuters) - Boeing Co (BA.N), the world's No. 1 commercial satellite producer, says strong demand in the commercial market will help its satellite division weather a downturn in U.S. defense spending and should continue to boost revenues in coming years.

Commercial revenues should account for about 40 percent of its satellite business in five or six years, up from 30 percent now, and just eight percent around 2006, Craig Cooning, vice president and general manager of Boeing's space and intelligence systems business, told Reuters in an interview late on Tuesday.

Cooning said technological advances, including Boeing's development of the first all-electric satellite, were continuing to generate strong demand, but the company was also exploring opportunities with potential new customers such as Google Inc (GOOGL.O) and Facebook Inc (FB.O).

Boeing does not provide revenues by business area, but Cooning said revenues were clearly going up.

At the same time, Boeing continues to build an array of satellites for the U.S. government, including the Wideband Global System communications satellites, and Global Positioning System II satellites. Boeing is also seeking to position itself to build smaller satellites or hosted payloads if the government moves in that direction, he said.

Cooning said the company's wide exposure to commercial markets, which demand faster delivery and fixed price contracts, had helped the company become more efficient and improve its performance on government contracts.

"A lot of companies are all scrambling for their piece of the pie, and that pie has gotten a lot smaller," Cooning said. "At Boeing, we're in a unique position because we have this strong balance between our commercial work and our military work."

Boeing is also keeping an eye open for possible acquisitions, Cooning said, although he provided no details.

He said the company learned some lessons from early problems on GPS satellites that drove it to build its own satellite payloads, and continued to look for opportunities to build its own components, including electronic systems and power controls.

"We want control of our own destiny," Cooning said.

He said about 50 percent of Boeing's satellites come from outside suppliers, but that percentage could drop to around 40 percent in coming years.

Bringing that work back into Boeing would help reduce costs, give the company greater control over components, and help ensure that it could meet tight delivery deadlines that are typical in the commercial market, he said.

"The biggest challenges I have are in my supply chain," Cooning said. "We're looking at where we have problems and what we can do to bring that work back in."

(Reporting by Andrea Shalal; Editing by Sofina Mirza-Reid)

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