Lockheed Martin  /  Reuters file
This Lockheed Martin prototype beat Boeing's entry to win a contract to built the next-generation Joint Strike Fighter -- a deal worth at least $200 billion. Foreign orders and servicing contracts could eventually double the value of the program.
By Maya Kulycky Reporter
updated 1/12/2004 4:33:16 PM ET 2004-01-12T21:33:16

They didn't begin as rivals. Back in 1915, Boeing's founder, William Boeing, took flying lessons from Glenn Martin. But history has placed these two powerhouses head to head in the defense industry. 

Supersonic jets, stolen trade secrets, and a bidding process tainted by scandal -- now that's a rivalry. And it's just a taste of the competition between aerospace giants Boeing and Lockheed Martin that's heated up in the last few years.

“The Boeing Corp. is the biggest airplane company in the world, but it has sought to become much more,” said Loren Thompson at the Lexington Institute. “It’s sought to become what’s called a system integrator by getting into space, by getting into military networks, by getting into army modernization and that has repeatedly put it into face-to-face standoffs with the Lockheed Corporation."

Boeing is about twice the size of Lockheed -- but the two companies are about the same size when it comes to the defense industry -- about $30 billion. 

But Boeing's mix of business makes it a more difficult company to run.

“Boeing has this mix of the civilian and the defense sector which means that they have different ways of doing business inside the same company,” said Prof. Robert Mittelstaedt at the Wharton School of the University of Pennsylvania. “And I think that has contributed to some of what appears to be, from the outside at least, the trouble they have had integrating those different types of businesses into one smoothly functioning company.”

Lockheed has stayed focused on defense, and that has paid off. The company recently beat Boeing to win the largest defense contract ever -- a deal to build the next-generation Joint Strike Fighter that will be worth at least $200 billion.

"That was a truly blockbuster deal," said Chris Mecray, an analyst with Deutsche Bank North America. “But we do point out that the unmanned combat air vehicle -- or UCAV -- that will be completed over the next couple of years could end up being a Boeing win, and that could end up replacing that lost revenue.”

That would be a big win for a company that has been struggling to put a tumultuous year behind it: CEO Phil Condit resigned on the heels of scandals the most recent one involving recruiting a Defense Dept. employee who worked on Boeing contracts. But the market has shrugged it off, and experts think the skies are clear ahead.

Meanwhile, Lockheed also looks strong. “So far Lockheed has been doing very well on execution the last 3 or 4 years, we have no reason to think that won't continue,” said Mecray. “And Boeing has been doing a pretty good job too. Most of the missed execution has come from other competitors out there.”

But will one company be the knock-down, drag-out champion?  Don't count on it -- the government wants both Lockheed and Boeing to survive and thrive, keeping the competition between these two rivals going strong.

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