Company analysis Lockheed Marting

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Lockheed Martin is public American Global Company with worldwide interests. It was founded in the year 1995 with the merger of Martin Marietta and Lockheed Corporation. It is into industries like Aerospace, Information Security and Defense. Its headquarters are located at Bethesda, Maryland, USA. It is served worldwide. There are about 115 thousand employees worldwide in 2013. The current Chairman, Chief Executive Officer and President of Lockheed Martin is Marillyn A. Hewson.

It is one among the world’s largest Defense Contractors. In 2009, only military sales accounted for 74%. It received about 7.1% funds which are paid out by Pentagon. The company operates in five business segments which comprise Information Systems & Global Solutions, Aeronautics, Mission Systems & Training, Missile and Fire Control and Space Systems. In 2009, the contracts of US government accounted for $38.4billion (i.e., 85%), the contracts of foreign government is about $5.8billion (i.e., 13%) and commercial & other contracts for $900 million (i.e., 2%). In both 2008 and 2009, the company topped in thelist of US Federal Government Contractors.

The company received theCollier Trophy forsix times, including 2001 for being a part of developing theF-35B/X-35 Lift Fan Propulsion Systemand in 2006 for leading a team that developed F-22 Raptorfighter jet.Among the sales in 2005, 85% is represented by US government and in the remaining 15%, 13% is related to international customer sales, with remainder attributes to the commercial customers. In 2003 and 2004, sales to the agencies of US government represented 78% and 80% of the total sales.

In 2000, Lockheed Martin leveraged the IT capabilities through the Data Capture system 2000 for tallying the year 2000 Census which processed nearly 148 million forms. It acquired the OAO Corporation in 2001, which is an IT contractor to strengthen the IT capabilities of the company. A new space vehicle Atlas V was launched which serves the government and the commercial customers that has improved access to space.

The sales of commercial satellites and launch vehicles has been very competitive due to low demand for the new satellites because of the excess capacity in Telecom Industry. The reduction of demand resulted the pricing pressures for the satellites and launch vehicles. Even in that in environment they received new orders for commercial launch vehicles and satellites in 2004 and 2005.

UTC Aerospace is one of the largest suppliers of defense and aerospace products that are technologically advanced in the world. They are a major supplier of international space programs.

UTC aerospace systems was formed by UTC in august 2012 by merging companies: Goodrich Corporation and Hamilton Sundstrand. It headquarters are in Charlotte, North Carolina.

They provided critical assistance in the Apollo 11 moon landing in 1969. They have built over 100 satellites for us. In addition to this they have crafted equipment for Canadian, Japanese, and German, French, Spanish, Argentinean and Swedish space crafts.

They mostly build products for commercial, military, business, regional, space & defense and rotorcraft programs.

There are two main segments of UTC aircraft systems: power & aircraft systems, sensing & control systems. They have a comprehensive array of systems, components and support agreements that are customized and integrated to help the operators to achieve the optimal aircraft utilization.

UTC aerospace systems provide innovative aerospace integrated systems & technologies that advance performance, efficiency & safety of commercial space exploration, global defense and aviation.

UTC employs approximately 42,000 people worldwide with an approximate annual sales of around 14 billion dollars. They have in and around 150 sites operating in 26 countries with 50 percent of the sites being located outside of United States.

The finances of UTC dropped to an all-time low in the years 1990-95. Post 1995 up to 2007, the finances of UTC skyrocketed and value of shares kept increasing. However, there was a steep decrease in the share prices up to 2009. There was a slump in the finances of the company. However, after 2009, the share prices have increased again.

In the mid 1990’s the military and space engine sales fell by 10%. Therefore, in order to remedy the situation, they embarked upon cost cutting.

Currently, the company has a market capital of 90 billion dollars. In 2011, Commercial aerospace and military aerospace sales were 22% and 20% respectively of UTC corporations consolidated net sales. In 2013, military and aerospace products constituted 19% of the total sales of UTC and commercial aerospace constituted 34% of the total sales of the company.

Boeing Company is an American multinational enterprise that is majorly involved in manufacturing and designing of aircrafts, rockets satellites. It also deals in leasing and product support services. Boeing is one of the biggest universal aircraft manufacturers, is the second-biggest aerospace & defense contractor in the world and largest exporter in terms of revenue. Boeing is categorized into five basic sections: Boeing Commercial Airplanes; Boeing Defense, Space & Security; Engineering, Operations and Technology; Boeing Shared Services Group and Boeing Capital. Boeing Defense, Space & Security manufactures both manned and unmanned airborne crafts, intelligence and security systems, communications and space & cyber integrated expertise solutions. In 2013, Boeing achieved $86.623 billion in sales and had around 170,000 employees in total. Boeing defense and security’s contribution was $33 billion business with 58,000 employees worldwide. Boeing Defense, Space & Security mainly includes tactical, heavy-weight and airlift aircraft, weapons, surveillance and counter-attack programs, and unmanned airborne crafts. All of which can be differentiated into five categories as follows-

  1. Global Strike
  2. Mobility, Surveillance & Engagement
  3. Vertical Lift
  4. Global Services & Support
  5. Network and Space Systems

Boeing was one among the several companies that compete to bid for Advanced-Tactical-Fighter competition. Boeing gave its consent to team up with General Dynamics and Lockheed, so that in case any one of these three wins the bid then they can work together in development. Eventually Lockheed design was selected and was consequently developed into F-22 Raptor .In 1996, Boeing successfully acquired Rockwell Aerospace and Defense Company. The Rockwell business became a part of Boeing, named Boeing North American inclusive. In August 1997, after a lot of speculations Boeing merged with McDonnell Douglas in a $13 billion stock exchange and formed the name The Boeing Company. Although this name actually was already in use as its official name since May 21, 1961. Boeing introduced a new company identity after the merger, incorporating the Boeing logo and a tailored variant of the McDonnell Douglas trademark, which was taken from the Douglas Aircraft logo back from the days of 1970s. In 2001, Boeing in the cut-throat competition from Lockheed Martin lost the Joint Strike Fighter Contract which is a multi-billion dollar one. Boeing's bid, the X-32, was spurned in approval of Lockheed's X-35 .Boeing came under severe criticism of its CEO and his subordinate, Philip M. Condit and Harry Stone cipher, for reasoning only about their own personal benefit first, and resulting in cause for the problems affecting Boeing in future years to come. In lieu of investing the large cash stock to build new airplanes, they started to buy back Boeing stock of around US$10 billion in amount. In June 2003, Lockheed Martin sued Boeing, accusing that the company had fallen back to unethical spying in 1998 to secure the Evolved Expendable Launch Vehicle (EELV) contract. In July 2003, Boeing was penalized by the SEC. later Pentagon stripped seven launches away from the company and awarded them to Lockheed Martin. In late November 2003, Boeing dismissed its top financial executive for unfair behaviour, after it found that he actively took part in negotiations involving the recruitment process of a missile defense expert while she still worked for the government of US and was in the condition to impact Boeing’s contracts. Darleen Druyun, the former Air Force official, was fired alongside CFO Mike Sears approximately around 10 months after she was recruited as deputy general manager and vice president of Boeing’s Missile Defense units.

. On June 30, 2010, Boeing announced its resolve to buy Argon ST as component of the company's vision to amplify its potential to tackle the problems in cyber and intelligence markets. In 2010, Boeing successfully acquired Argon ST Inc. Argon ST, which was based in Fairfax, VA. Its main domain under which it had expertise were in development of C4ISR (Control Command, Computers, Communications, Intelligence, Surveillance, and Reconnaissance) and combat systems.


There are three types of leverages used in management accounting as follows:

  1. Operating leverage
  2. Financial leverage
  3. Combined or total leverage

Operating Leverage: The use of fixed operating cost by the firms. Operating leverage is that a change in volume of sales results in a “more than proportional” change in operating profit (loss). Degree of operating leverages is calculated as the percentage change in a firm’s Operating profit resulting from a 1 percent change in output or sales.

Degree of Operating leverage = Percentage change in EBIT / Percentage change in sales

If we want to calculate the degree of operating leverage from Q unit of output than it can be calculated as follows:

DOLQ UNITS = Quantity (selling price – variable cost per unit) / (Quantity (selling price – variable cost per unit) – Fixed Cost)

Here DOLQ UNITS = Degree of operating leverage on Q quantity

DOL tells us about the sensitivity of a firms operating profit in terms of quantity to change in firms sales. When we compare companies by operating leverages, the firm with highest DOL is more sensitive than other company.

Financial Leverage: The use of fixed financing cost by the firms. Finance leverage is calculated as change in firms EPS (earning per share) due to change in 1 percent in operating profit of the firms. DFL used in industry to find out the increase in return of common shareholders.

DFLX dollars = Percentage change in EPS (earning per share)/ Percentage change in Operating Profit.

DFLX dollars = Degree of finance leverage at EBIT of x dollars.

Combined Leverage and Total Leverage: The combined leverage will calculated as the percentage change in earning per share of a firm due to change 1 percent in total sales. This leverage can be used to determine the optimal operating and financing leverages.

Degree of total leverage for q unit of output can be calculated as follows:

DTLQ units = Percentage change in EPS (Earning per share) / Percentage change in total Sales

Degree of total leverage = DOLQ UNITS * DFLX dollars