On the Record with:
MIKE STACEY, CHIEF EXECUTIVE, MEGGITT PLC

Ask Mike Stacey about the obstacles in selling to the U.S. defense establishment and the chief executive of Meggitt PLC raises a quizzical eyebrow: U.S. Department of Defense and U.S. companies account for fully half the $480 million in sales of the British-based aerospace and defense electronics company.

If anything, Meggitt has failed to focus on Europe.

"Two years ago we recognized that while we were very strong in the U.S., and especially with Boeing, we were relatively weak in Europe and Airbus (only 15% of sales). We've now addressed that so our shipset value in each Boeing or Airbus aircraft is about the same," Stacey told Show News.

A shrewd policy of acquisitions and partnerships, especially in the U.S., opened the doors for a growing Meggitt. "We find America a very happy hunting ground," Stacey said. "Not only half our sales, but half our facilities and technology are now in the U.S."

While others tripped over U.S. export licensing rules and a reluctance to buy from foreign companies, Meggitt won three special security arrangements with the Pentagon that allow it to work with its American partners on "classified" programs without having access to sensitive American technology.

Among its successes Meggitt lists supplying in partnership with Raytheon the ALE-50 towed missile decoy for almost all U.S. combat aircraft, as well as Tornado, Eurofighter, Gripen, Nimrod and Global Hawk. The decoy proved its worth in Kosovo where on 10 occasions it distracted SAM missiles from B-1 bombers.

And on helicopters, Meggitt partnered with BFGoodrich to win a $100 million contract with the U.S. Navy for HUMS health monitoring systems. The U.S. Army followed suit with an order to equip 2,000 helicopters.

Meggitt's acquisition campaign began in earnest with the purchase in 1997 of Cartwright Electronics in the U.S., in 1998 of Swiss Vibro-Meter ("which was just stuffed with technology," said Stacey), Whittaker Controls of California last year, and just two months ago S-TEC Corp of Texas, which lists autopilots and UAVs among its products. Rounding out the field was the earlier purchase in 1992 of the Endevco electronic sensors subsidiary of AlliedSignal.

"We now have a newly focused systems capability as a result of these acquisitions," said Stacey. "We were trying to assemble all the components companies but were missing an autopilot. Then S-TEC popped up."

Stacey believes Meggitt is now in pole position (thanks to Vibro-Meter's vibration monitoring, Endevco's sensors and Whittaker's fire detection technology) to offer engine manufacturers a single black box health monitoring system, to which it can add secondary cockpit alerts and displays (from S-TEC), and links to the flight data recorder.

In the cockpit it now supplies the Piper Malibu's full electronics suite, autopilot and secondary displays, and equips 24 other aircraft types. Over 16,000 S-TEC autopilots are in service, and Meggitt equipment is installed on more than 1,000 new aircraft every year.

Stacey, who typifies Meggitt as a technology company (the firm spends a robust 7.5% of its sales on R&D), believes the future holds more of the same. More acquisitions as they make sense, and more new "highly intellectual" products in selected niche areas.

"We don't just want to survive-we want to prosper," said Stacey. "We can't be a 'me-too' company." City analysts evidently believe Meggitt is heading in the right direction, as they are forecasting profits this year of $105 million, up from $82 million the year before.

Two earlier problems have been resolved, Stacey said. Meggitt is benefiting now from a raft of products that entered gestation several years ago, and it has many more on the way-so the lean times of development-only are behind it. And the acquisitions of Vibro-Meter and Whittaker presented not only new technology but an existing worldwide customer support system on which Meggitt is layering its other products.

"Before, we just couldn't support our products worldwide," Stacey said. "This is clearly a case where two-plus-two equals five."

By John Moris