On the Record with CLAY JONES, PRESIDENT & CEO, ROCKWELL COLLINS
Strategies laid out in 1996 are paying off handsomely for Rockwell
Collins, which expects to grow 13% this year despite the difficulties
of the commercial market.
The avionics company set a blistering 15% annual growth rate through
2001, and will slow only slightly this fiscal year to $2.55 billion.
As president and CEO Clay Jones explains "We've been tested
on the upside and passed the test. Now were being tested on the
downside, and were passing that test, too."
Seven years ago, when Rockwell Collins spun off its space defense
business to Boeing and reunited numerous Collins units under one
umbrella, it decided to balance itself between the commercial
and defense markets. Two years ago its business was 60% commercial,
but that balance has now shifted to 50-50. Defense, says Jones,
has more than made up for the 7% decline in commercial business.
But that is more through Rockwell Collins chasing-and winning-new
business than through any organic growth in existing programs.
"The impact of all the recent conflicts around the world
has been relatively modest for us," says Jones. "The
real growth is because of our success in winning new programs."
These include winning the contract for cockpit- and helmet-mounted
displays and integrated communication and navigation systems on
Joint Strike Fighter, which will be worth more than $2 billion
over the life of the program, and JTRS, the DoD's open architecture,
software-programmable Joint Tactical Radio System that will be
adopted as the joint service standard for all new tactical communication
systems. JTRS alone is worth $1.5 billion, according to Jones.
"In addition we have won some very significant upgrade programs
on rotary winged aircraft," he added.
Much of this success stems from developing open architecture avionics
(such as business aviation's Pro Line 21) and customizing and
integrating it for different applications. Paralleling the technological
advancements, Jones has driven the company through lean and best
practice processes while developing a culture of corporate open
architecture, meaning products, people and expertise are integrated
across commercial and defense markets.
"For example, our KC-135 global air traffic management upgrade,
which is just entering production after two years of R&D,
was won with a significant combination of defense and commercial
resources such as our commercial weather radar and the avionics
architecture that was born out of our business aviation business,"
says Jones. "And the helicopter upgrades use the same architecture
because it is so adaptable."
Rockwell Collins' strategy to maintain diversity and balance dictated
expansion into new markets. It has made eight acquisitions in
the last seven years in search of product, market and technology-or
any combination of the three. Among them: the inflight entertainment
business of Hughes-Avicom; Flight Dynamics, the market leader
in head-up guidance systems for airliners and business aircraft;
Airshow, the leading integrated cabin avionics company for business
aviation; Communication Solutions, an expert in signals intelligence
(SIGINT) and surveillance solutions; and a stake in Tenzing Communications,
which is bringing email and web surfing to the passenger.
A star acquisition was the $200 million-revenue Kaiser Electronics.
"They brought to us a whole new product line-helmet-mounted
displays," says Jones. "We had head-up and head-down
displays, and no capability in helmet-mounted. This was a very
rapidly growing technology in fighter aircraft and helicopters.
They also brought a new market to us: we had very little product
going into tactical fighter and attack aircraft, and they had
very formidable position on the F/A-22, F/A-18, JSF, and then,
after the acquisition we combined forces to win the F-15 upgrade.
"Then finally they brought projection display competency,
which was particularly useful in fighter aircraft where LCDs can
be limited by space. They were probably two years ahead of our
internal development.
"They had product, market and technology. It was a perfect
acquisition," Jones says.
He believes there is still plenty of room to expand and is looking
"aggressively" to add further bolt-on acquisitions at
the right price. If they have to do with information management
and connectivity (via open architecture avionics), or MRO and
service and support (including logistics and inventory management)
Jones will be even more interested.
"These are the growth areas for the next few years,"
he predicts.
