* Boeing cites better profitability in satellite sector
* Says SBSS follow-on price was much lower
By Andrea Shalal-Esa
WASHINGTON, March 15 Boeing Co (BA.N) has
retooled its satellite business to remove extra costs and
become more competitive, allowing it to generate more profits
than in the past, a top company executive said on Tuesday.
"We're doing a lot better than we used to," Craig Cooning,
chief executive of Boeing Satellite Systems International, told
reporters, giving an upbeat assessment of his division's
outlook after less than stellar results in the early to
Boeing completed work on a series of government and
commercial satellites over the past year, added considerable
orders to its backlog, and continues to generate about half its
revenue from classified U.S. government work, Cooning said.
The government launched a second, classified prototype
miniature space shuttle built by Boeing earlier this month.
Cooning gave no detailed revenue breakdown, but said his
division accounted for about one-third of Boeing's annual
revenue in network and space systems, which dropped 13 percent
to $9.4 billion in 2010 from $10.9 billion a year earlier.
Commercial sales would account for about 18 percent of
revenue this year, up from 10 percent in previous years,
Cooning said, forecasting further gains in coming years. The
shift would help Boeing maintain jobs and revenue even as U.S.
defense spending is expected to begin to taper off.
Boeing sees great promise in hosted payloads, or smaller
payloads for government use that piggyback on satellites
already being built for commercial satellite operators.
Boeing is building a standard commercial telecommunications
satellite for Intelsat [INTHBT.UL] with a UHF-frequency hosted
payload owned by Australia's military. A second one was in work
for the U.S. government, the company said.
Boeing expects to sell two to four of the hosted payloads
each year, underpinning demand for commercial satellites.
The Air Force's drive to use block buys to drive down the
cost of new military satellites is "a great idea," but
contractors should earn the right to participate by proving
they can lower costs, said Cooning, who oversaw Air Force space
acquisition until his retirement in 2005.
The Air Force said it could save at least 10 percent if
Congress lets it to buy four satellites built by Lockheed
Martin Corp (LMT.N) in batches of two, instead of one at a
Cooning said he did not know why Boeing satellites were not
included in the Air Force's initial attempt to revamp its
procurement approach, but said Boeing was continuing its own
efforts to drive down costs by leaning out its operations.
He said Boeing could now build three new Wideband Global
Satellite (WGS) satellites for the cost of two.
Cooning said talks were also under way with other foreign
countries about joining Australia as partners on the WGS
satellite system, and he hoped those discussions could reach
fruition before the end of the year. Australia has already
agreed to pay for a sixth WGS satellite under an agreement that
will give it access to the U.S. satellite system.
He said recruiting international partners might also work
for the Space Based Surveillance Satellite (SBSS) program,
especially given that it would offer other countries a "cost
effective" way of getting access to that capability.
Boeing built the first SBSS satellite, which was launched
last year to track man-made objects in space.
Cooning said he was "stunned" by recent comments from Air
Force officials questioning the affordability of a second
satellite, noting that Boeing submitted a fixed price offer
that was "a lot lower."
The first SBSS satellite cost $838 million, but total
program costs are now estimated at $917 million, including
extra costs for on-orbit checkout and other testing
(Reporting by Andrea Shalal-Esa, editing by Matthew Lewis)