It’s all about what industry analysts call "legacy systems" -- designs and programs that are acquired as a company expands from its core base of products, adding elements of its newly-acquired "heritage" firms. For space, that heritage forms a series of programs at the heart of the American space industry, rapidly shifting to two major powerhouses for commercial space.
During the Cold War, experts called the emerging competition the creation of a "bi-polar" world, meaning two major powers were vying for control -- the U.S. and the Soviet Union. As a result of the Boeing-Hughes acquisition, there is a new "bi-polarity" in space business -- with Boeing on one end and Lockheed Martin at the other. And the Boeing "pole" is rapidly advancing.
If the federal government approves the merger, Boeing will add this crucial manufacturing capability to its existing suite of space assets. For its part, industry watchers are already blessing the move.
"In Wall Street’s opinion, it makes more sense to separate service providers in high growth market segments from traditional manufacturers," according to Clayton Mowry, director of the Washington-based Satellite Industries Association. "The move should allow Boeing to strengthen and consolidate its position in the commercial space business by buying one of the top companies in that business," Mowry said.
Boeing’s commercial space pedigree and attendant assets were already extensive:
- Delta II, III, and IV launch vehicles
- Inertial Upper Stage rocket motors
- Sea Launch commercial rockets
- Global Positioning System satellites
Rocketdyne Division, building:
- RS-27A engines for the Delta II and III
- RS-68 for the Delta IV
- Main Engines for the Space Shuttle
- MA-5A booster engines for Lockheed’s Atlas I and II
And from its "legacy" heritage acquisitions:
From acquiring McDonnell Douglas:
- Project Mercury and Gemini space heritage
- Skylab Space Station
- Saturn IB and Saturn V first and third stages
- H-1, F-1, and J-II rocket engines
From acquiring Rockwell International (formerly North American Aviation):
- Space Shuttle Orbiter
- Apollo Command and Service Modules
- X-15 Hypersonic rocket plane
- S-II large liquid rocket second stage from the Saturn V boosters
Boeing served as the Apollo project integrator in the late 1960s, and also built the program’s Lunar Rover moon car.
In acquiring Hughes, it adds commercial satellites to that mix.
"It allows Hughes to focus on its high-growth services markets and gives it resources to invest in future broadband projects," Mowry added. Broadband communications and data services are expected to be the next major advance in space telecommunications services.
Hughes’ manufacturing capability, which was split off from the company by the Boeing purchase, represent the capability to design and build the world’s largest communication satellites. They include commercial, military, and NASA customers and those of foreign governments:
Hughes satellite pedigrees:
- HS-376, 601, and 702 commercial satellite buses
- Tracking Data Relay Satellite (TDRS) 8-10 for NASA
And heritage systems:
- Syncom communications satellite (1966)
- Early Bird satellite demonstrators
- Intelsat 2 spacecraft buses
- USAF Tacsat
- Intelsat 4 (HS-333 series)
- Application Technology Satellites 1 through 5
- Pioneer Venus probes for NASA
- OSO Solar Observatory spacecraft
- Galileo Atmospheric probe
- Japan’s Metsats
- GOES weather satellites-second generation
- Surveyor Moon lander probe for NASA
But while the bringing together of the two pedigrees will create a massive new competitor, industry analysts agree that the main effect will be within the domestic U.S. space competition.
"I don’t think it will impact America’s position in the global space marketplace," SIA’s Mowry said. "Since it’s from one major domestic player to another."
Others point to the need for Hughes to maintain its leadership in communications satellite technology.
"The real question is will the new Boeing/Hughes remain the dominant satellite manufacturer," said Marco Caceres of the Virginia-based Teal Group.
Caceres suggested that Hughes' leadership was built on years of Pentagon contracts, but that business has cooled in the past decade.
"Much of their technology came from their DOD (Department of Defense) work, which has dried up," Caceres told space.com. "Their technology today isn't as advanced as it used to be. So Loral and Lockheed are now pretty much equal (with Hughes), except for their backlog orders."
He suggested that with Boeing's resources, Hughes satellite group might now be able to advance its designs and increase its market share along with it.
"They haven't gotten too many new contracts in the past year, since they are absorbing the current demand with their existing products," Caceres said. "As part of Boeing they might be in a better position."
Caceres also said that the timing of the acquisition is good for Boeing.
'It's a lot easier for Boeing to digest Hughes' satellite group now when their ramp-up for production has stabilized," he said. "Much of the market's demand for satellites is being met by (Hughes) production capability. It would have been harder for Boeing to do this earlier when Hughes was building up".
But the effects on the remaining competitors were less clear. Lockheed acquired portions of Loral to strengthen its satellite-building capability. But Loral’s satellite business isn’t as large as Hughes. And Lockheed has been beset with management problems in its space sectors, capped last year by repeated failures of its launch vehicles and a damaging internal review of its corporate procedures.
In a rare head-to-head competition last fall for military intelligence satellites, Boeing beat out Lockheed-which had the "heritage" of decades of previous contracts, worth billions doled out by the National Reconnaissance Office. The win suggested that Boeing was seeking to establish itself as the dominant U.S. space firm. The Hughes acquisition furthers that effort.
And it gives Boeing a satellite-sector component that also bolsters its stated goal to add satellite-based communications services to its global fleet of commercial aircraft.
Hughes, in essence, becomes a satellite services company alone, leaving its DirecTV service as the core of its remaining space and telecommunications business as it sells off its manufacturing capability to Boeing.
The deal may also signal the beginning of a new round of consolidations and realignments in the U.S. space industry.
Rumors swept Washington this week that Lockheed would sell off its commercial launch business, retreating from the Boeing juggernaut. A company spokesman denied the reports.
The Teal Group's Caceres wasn't concerned about the Boeing/Hughes deal's potential impact on Lockheed.
"This business has peaks and valleys," he said. "Lockheed, if they stay in the business, can compete against this new alignment. They have the resources, too."
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