Lockheed Shares Advance as Restructuring Inches Forward

Lockheed Martin (LMT) shares rose 5% Monday as the defense contractor dribbled out a few more details about the organizational overhaul it started studying in June.

The Bethesda, Md., maker of defense electronics said it would cut business lines to 17 from 27 but failed to provide further information about layoffs and divestitures that Wall Street has been expecting. The stock was up 1 1/2, or 5%, at 32 1/8 in midafternoon trading.

The announcement confirmed reports in The Wall Street Journal Monday that Philip J. Duke, Lockheed's chief financial officer, would move to another job after less than a year in his current spot. The company also said it would restructure its bureaucracy into four business units from the current five.

Lockheed, the government's largest supplier of equipment and services for the military and space programs, said the changes aren't expected to affect projected earnings of $1.50 per share in 1999 and $2.16 in 2000.

Since June 9, Lockheed has been officially pondering whether to rid itself of eight business lines that may be dead weight. Broadly, the units include the aerospace electronics line, control systems and environmental management. They employ around 9,000 people at the company's Bethesda headquarters and elsewhere.

Investors were eyeing the news hesitantly, said Pete Boockvar, a trader for Miller Tabak Hirsch who said he has no position on Lockheed.

"They speak of mulling a restructuring," Boockvar said. "If they're still mulling it, that's not enough. We want to hear news."

An analyst reached Monday afternoon said he was unsure what to think. William Kidd, who covers Lockheed for C.E. Unterberg, was concerned about the size of the write-offs involved if the company does in fact sell its extraneous business units. Lockheed said in the press release that it could take up to $1 billion in charges, mostly noncash, to cover any divestitures.

The company expects to sell for $1 billion units that are responsible for $1.8 billion in annual revenue, Kidd said. In the short term, that's a loss. But the benefits of restructuring could make it worthwhile in the long term, he added.

Without additional details to analyze, it seems like "they just threw out some numbers," said Kidd, whose firm hasn't done underwriting for Lockheed. Lockheed's board met last Thursday, fueling analysts' expectations of a substantive announcement.

Jim Fetig, a Lockheed spokesman, said that "there are no buyers lined up" at the moment for the units Lockheed is considering selling. The units "are being evaluated for divestiture, and we expect that process to take six to nine months. We expect to find a buyer" for each unit, the spokesman said.

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