By DANIEL TAUB
With the company's merger to Lockheed Martin Corp. now in serious jeopardy, officials at Northrop Grumman Corp. were being forced last week to seriously consider the question: Can they survive as an independent company against the industry giants.
The Department of Defense asserts that Century City-based Northrop can. In filing a joint lawsuit with the Justice Department to block the merger, Defense Department Undersecretary Jacques Gansler said Northrop could survive for at least six years on its strengths in stealth technology, defense electronics and aircraft subsystems.
Aerospace industry analysts agreed that Northrop's strengths lie in those areas, but that the company would face a major challenge in competing with Lockheed Martin, Boeing Co. and Raytheon Co. the aerospace industry's three largest companies if the merger is blocked.
Paul Nisbet, president of aerospace investment research firm JSA Research Inc., said that in the aircraft arena, Northrop would find itself going head-to-head with Boeing and Lockheed, and with Raytheon and Lockheed in the electronics sector.
"No matter where they go, they're facing two competitors, each many times their size, whether it's in aircraft, or other types of weapons systems, or whether it's in electronics," Nisbet said. "It's not a real pretty picture. So (Northrop Chairman) Kent Kresa will have his work cut out for him if he finds himself independent again."
For their part, Northrop officials say they are continuing to pursue the merger, which federal officials are opposing on the grounds that it will give the combined company monopoly-like control over tactical and strategic aircraft, airborne radar systems, sonar systems and other defense systems.
Lockheed and Northrop officials say the merger will result in better products in those areas, and that federal officials are specifying an unreasonable amount of divestitures to drop their opposition to the deal.
But even as they pursue the merger, Northrop officials say their company is in a position to be successful independently, particularly in the areas of defense electronics and systems integration, which are expected to account for two-thirds of the company's business by 2002, said Albert Myers, Northrop vice president and treasurer.
Currently, those sectors account for about 50 percent of Northrop's business, up from the 15 percent it represented in 1993.
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