Lockheed Martin buys Sikorsky for 1.1X revenue

“Lockheed Martin to Buy Sikorsky for $9 Billion” is a Wall Street Journal story about how one defense contractor bought another. The actual cost to Lockheed Martin is only $7.1 billion due to some tax law complication. Sikorsky annual revenue is $6.5 billion per year. That makes the company worth 1.21 revenue.

Being a defense contractor is supposed to be crazy profitable, but 1.1X revenue is less than the 1.8X average for the S&P 500 (chart). Uber is trading for about 100X revenue (Fortune). Can it truly be the case that coordinating rides is worth seven times as much in aggregate as being a core member of the military-industrial complex?

This other WSJ article says that there are only $150 million in “annual synergies” from combining the two companies. It also notes that the new Lockheed/Boeing long-range bomber will cost $80 billion (why not buy Airbus A380s and toss bombs out the side?). An inset video features Lockheed CEO Marillyn Hewson talking about the challenges of running her enterprise. (It is too bad that there isn’t a comment section; Ellen Pao could log in and remind fellow readers that “If Marillyn Hewson had been a guy, she could have had a really successful career.”)

What do readers think? Is it truly possible that collecting tens of billions of tax dollars for decades-old designs, such as the Black Hawk, is not more profitable than the latest Silicon Valley fad?

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One thought on “Lockheed Martin buys Sikorsky for 1.1X revenue

  1. Just because uber is overpriced (and it is) doesn’t mean that Sikorsky was underpriced. The US military is shrinking, the oil industry has stopped ordering for now and there is a very limited market for such machines otherwise. OTOH, everyone needs a cab ride.

    One of the consequences of military hardware becoming absurdly overpriced is that the government keeps ordering fewer and fewer units (which only increases the price because the biggest part is the R&D cost which has to be amortized over a smaller number). During WWII, the US gov. ordered bombers and fighter planes by the thousands. By the TENS of thousands (13,000 B-17s, 15,000 Mustangs, etc.) Even with its ridiculous budgets, now many $1 billion bombers will the USG buy? We are talking about less than 100 units.

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