Raytheon 2006 Annual Report Download - page 60

ⳮContinued development of the U.S. Army’s Future Combat Systems, which we support through our Ground Sensor
Integrator (GSI), Battle Command Management and Execution, and Non-Line-of-Sight Launch System solutions;
ⳮContinued production of DDG 1000 Zumwalt Class Destroyer, the U.S. Navy’s next generation surface combatant, for
which we are the prime mission systems equipment integrator for all electronic and combat systems; and
ⳮAcceleration of the deployment of Global Hawk and Predator unmanned aerial vehicles, both of which carry our
payloads and systems.
The President’s fiscal year 2008 budget and Future Years Defense Plan (the “FYDP”), which projects defense costs for the
next five years, are consistent with the 2006 QDR’s recommendations. Within the DoD budget, the Research, Development,
Test and Evaluation budget and the Procurement budget, collectively known as the investment accounts, are a key source of
funding for our programs, particularly modernization programs. These investment accounts show continued growth
throughout the FYDP, with some flattening in the latter years. Given the breadth of our programs, we also receive
substantial revenue from the DoD’s Operations and Maintenance accounts. We expect these accounts to remain fully
funded in the near-term, but their funding will likely decrease as the pace of current operations declines. We also anticipate
that with the control of Congress shifting parties, federal government contractors will become subject to increased scrutiny
and oversight. Overall, however, we expect continued robust levels of DoD funding for ongoing operations.
Internationally, the growing threat of additional terrorist activity, emerging nuclear states and conventional military
threats, have led to an increase in demand for defense products and services and homeland security solutions. We
anticipate that international defense budgets will grow slightly faster than domestic budgets and should also be less
volatile. International customers are expected to also continue to adopt similar defense transformation initiatives as the
DoD’s initiatives. We believe that this trend will continue because many international customers are facing the same
threat environment changes as the U.S. and they wish to assure that their forces and systems will be interoperable with
U.S. and NATO forces.
Against this backdrop our customers are increasingly seeking mission solutions, rather than just products or services.
They also want to capture more functionality from existing assets in order to meet increasingly challenging mission needs
within constrained budgets.
Our Strategy and Opportunities
We are focused on the following business strategic imperatives:
ⳮDefend and grow our core defense markets, Sensing, C3I and Effects;
ⳮContinue to expand our role in Mission Systems Integration;
ⳮAccelerate our international business growth;
ⳮExpand our business into adjacent and emerging markets;
ⳮBecome a leader in the Mission Support market; and
ⳮContinue to be a customer-focused company based on performance, relationships and solutions.
Core markets and capabilities. We believe that our technologies, domain knowledge and key capabilities in our core
defense markets and their alignment with the QDR transformational priorities and our customer needs, position us
favorably to continue to grow and take market share within these markets. In particular, we leverage the following
capabilities across our solutions and business segments:
ⳮOur sensing capabilities encompass a broad range of technologies, including RF (radio frequency) sensors and EO
(electro-optical) technologies. RF technologies are used in radars, missile seekers, communications, electronic warfare
and directed energy weapons, including our Active Electronically Scanned Array (AESA) radars being produced by our
SAS business segment for the U.S. Air Force’s F-15 and B-2 aircraft and for the U.S. Navy’s F/A-18 fighter jet. In
addition, our IDS business segment is continuing to develop critical Gallium Nitride semiconductor technology which
we believe will serve as an important building block for the next generation of radar. EO technologies allow the
warfighter to see the extended battlespace across space, airborne and surface domains, including technologies that
enable night vision and precision strike missions. During 2006, our SAS business segment delivered the first Block VI
sensor payload for the missile-detection Space Tracking and Surveillance System (STSS). Delivery of this infrared
acquisition-and-track sensor suite marks a major milestone in providing the Missile Defense Agency with a space-
based tracking capability. We also delivered our 100th Advanced Targeting Forward Looking Infrared pod (ATFLIR)
for the F/A-18 E/F.
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