The current stock valuation for the newly incorporated European Aeronautic Defense and Space Company is lower than it deserves to be, the company's co-executives said here.

EADS started trading on the Paris, Munich, Madrid, and Paris stock exchanges on July 10 and is currently valued at a little over $16 per share. "We had hoped for a higher initial value for our stock," said Philippe Camus, co-CEO for EADS. Nevertheless, he said, the current base is stable and offers investors "significant upside potential."

Camus attributed the poor response from the financial markets to investors' overall assessment of defense companies, rather than to concern over EADS. Rainer Hertrich, the other EADS co-CEO, said the company's "joint potential is enormous."

With the setting of basic industrial structure now behind it, EADS will focus on integrating its business units. About 350 projects have been established. Like BAE Systems, EADS has been very sensitive to merger-induced problems experienced by major U.S. defense contractors during their integration phase.

For its part, EADS hopes to generate $500 million in savings by 2004, half through combined purchasing power and the other half through overhead reductions. Hertrich expressed confidence the company would be able to meet financial goals. The latest indicator, he said, is the earnings reported yesterday by the former Dasa, the German arm of EADS. The second quarter report indicated a 30% improvement in operating profit over the same quarter last year.

On the commercial aircraft side, Hertrich said that for the Airbus A3XX expectations are for 50 aircraft orders with nine airlines. Camus said risk-sharing partners are still being sought, in time for the aircraft's formal launch later this year. Airbus wants partners for 40% of the cost. Camus said U.S. companies are expected to be among the partners, although Lockheed Martin officials said they have decided not to be a risk-sharer. Lockheed Martin, however, would entertain a subcontractor role.

Hertrich aso said EADS has not made any decision on whether to join the Exostar electronic commerce venture involving Boeing, BAE Systems, Lockheed Martin, and Raytheon. "

We wish to investigate different alternatives thoroughly," he said, while stressing the interest in pursuing an electronic commerce approach.

By Robert Wall