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    Raytheon marks 90 years, with challenges ahead

    The Radarange, first produced by Raytheon, was a precursor to the modern-day microwave oven.
    Photo by Paul Popper/Popperfoto/Getty Images
    The Radarange, first produced by Raytheon, was a precursor to the modern-day microwave oven.

    It is best known as the world’s biggest missile-maker. But at its core, Waltham defense contractor Raytheon Co. is an electronics company of engineers who have made some of the biggest technological breakthroughs of the 20th century.

    The microwave oven, global positioning systems, and even e-mail can be traced back to its engineers. And now it’s that legacy of innovation that could help Raytheon navigate the coming era of big cuts in military spending.

    With the war in Iraq over and the US military operation in Afghanistan ending, Congress passed the Budget Control Act last year, which required the Pentagon to slash $487 billion over 10 years, beginning in 2013. Now, as Raytheon marks its 90th year in business on July 7, it’s facing leaner times for America’s big defense contractors.


    So far Raytheon has been reluctant to talk about the challenges ahead. But defense industry analysts say the company could invest more in its satellite and communication technologies, develop more programs aimed at the growing threat of cyber-security, and try to boost sales to foreign countries.

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    “Raytheon is more insulated than its competitors to a downturn in defense demand because there will always be a military requirement for cutting-edge electronics,” said Loren Thompson, a defense analyst at the Lexington Institute in Washington, D.C. For Raytheon, he said, “it will always come back to the electronics.”

    Today Raytheon is an $18 billion defense giant with 71,000 employees spread around the world. It has more than 15,000 contracts and sells missile systems, massive radars, and communication satellite systems to the US government and foreign countries, such as Saudi Arabia and Taiwan. Last year, the company’s profits grew 1.4 percent to $1.8 billion, making it the fourth- most-profitable company in Massachusetts.

    Its origins in the 1920s had nothing to do with weapons, though then as now it tried to tackle an ambitious new technology that promised to change a way of life: refrigeration. Incorporated as American Appliance Co. in Cambridge, the company was founded by three engineers, including future Massachusetts Institute of Technology vice president Vannevar Bush. They raised $50,000 to build a refrigerator without moving parts, according to “Raytheon Company: The First Sixty Years,’’ an unofficial biography of the company.

    That idea failed. The company quickly moved on to making state-of-the-art radio tubes, which helped modernize the market for household electronics. In 1925, American Appliance changed its name to Raytheon, the Greek word for “light of the gods.”


    “Raytheon’s history has paralleled the role of electronics in American commerce and culture,’’ said Thompson. “It had its first success with the advent of radio, and then it became a major provider of radar and other electronic technology of the Cold War period.”

    During World War II, Raytheon built magnetron tubes the US military used for air defense radars. It didn’t begin making missiles until the late 1940s, when it developed the first guided missile that could destroy an airborne target in flight. From there, it was responsible for a string of advancements in the missile industry, and began the Patriot missile system in the 1970s.

    At the time it was still a smaller player in the defense industry. It wasn’t until the 1990s, when Raytheon spent billions of dollars to buy Hughes Aircraft Co., Texas Instruments Defense Systems, and E-Systems that it became a major force in the military contracting.

    The company’s surface-to-air Patriot missile system, which was used through the first and second Iraq wars, is the company’s best-known product. It’s still in demand. In 2011, Raytheon received a $1.7 billion contract from Saudi Arabia to upgrade its Patriot missile systems.

    “There has always been an international footprint that Raytheon has had, and that footprint is probably more important today,” said Byron Callan, a defense industry analyst at Capital Alpha Partners in Washington.


    International markets represented 25 percent, or $6.2 billion, of the company’s net sales last year, according to its 2011 annual report. It sells products to 81 countries, and has the biggest percentage of overseas sales among large defense contractors in the United States. It has said it plans to grow that market.

    ‘I certainly believe they are going to feel some pain.’

    “Emerging threats are driving demand for our products around the globe, in particular the Middle East and Asia and Pacific regions,” said Raytheon chief executive William Swanson in an April conference call with investors.

    Swanson would not comment for this article. Raytheon would not comment about how it plans to react to the possibility of defense cuts.

    “I certainly believe they are going to feel some pain in the upcoming budget declines,” said Callan.

    But even with a smaller Pentagon budget, there are big opportunities for Raytheon, he said. For instance, the Navy will be looking for a contractor to update its Air and Missile Defense Radar systems and Raytheon and Lockheed Martin will likely go head-to-head for that, which could mean billions of dollars in additional business for Raytheon, Callan said.

    The company could also see more business coming as the government bolsters efforts to combat cybersecurity threats. Raytheon is also competing with Lockheed to build a high-powered radar system for the Air Force to detect space debris.

    “The way that we do business is that we go work on things that leverage our technology base and our domain knowledge,” said Mark Russell, the company’s vice president of engineering, technology, and mission assurance.

    “What we are very concerned about is working within the domains and on the technologies that we are good at.”

    Russell epitomizes the company’s engineering ethos. He has been with the company for 30 years and started out working on the Patriot missile system. In his office in Waltham, his shelves contain evidence of his long career, including a mangled piece of circuitry from a Patriot missile that was destroyed in a test firing at the White Sands Missile Range in New Mexico.

    “We think of ourselves as a technology company,” Russell said. “We are driven by engineers who do really hard things.”

    Michael B. Farrell can be reached at