Boeing sees growth in cyber despite defense cuts

ANNAPOLIS JUNCTION, Maryland Tue Oct 25, 2011 11:44pm BST

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ANNAPOLIS JUNCTION, Maryland (Reuters) - Boeing Co (BA.N) opened a new cyber security center on Tuesday, saying it expected high single-digit or low double-digit growth in the sector in coming years despite major cuts in defense spending.

Dennis Muilenburg, chief executive of Boeing's Defense Space and Security, said creation of the new facility was part of Boeing's strategy to offset cuts in defense spending that could total as much as $1 trillion over the next decade.

Boeing's defense business has continued to invest in core areas such as aviation and satellites, and has already expanded international sales from 7 percent of revenues to around 18 percent, with that proportion due to increase to around 25 to 30 percent, Muilenburg told reporters at the center's opening.

In addition, Boeing would also continue to move aggressively into areas such as cyber security, where it expected to generate good revenues from government and commercial customers in coming years, Muilenburg said.

He declined to give details on what share of overall Boeing defense revenues came from cyber security, but said the company would continue to evaluate additional acquisitions to add new capabilities to its cyber security portfolio.

Boeing also bought several smaller cyber companies, including eXMeritus and Kestrel that brought in tools for data analysis and secure information-sharing capabilities. Narus and SMSi, two other recent acquisitions, added real-time traffic intelligence solutions and analytics capabilities.

Muilenburg said Boeing still aimed to balance overall commercial and defense sales, allowing growth in one area to help offset down cycles in the other, but commercial sales looked likely to overtake defense sales in coming years.

In past years, he said, defense and commercial sales contributed about 50 percent of revenues, a contrast from five years ago when defense sales outweighed commercial sales by about 60 to 40 percent. Now the pendulum was swinging the other way, with commercial sales buoyed by strong demand.

NEW CENTER AIMED AT HELPING BOEING REACH NEW CUSTOMERS

Boeing's new "Cyber Engagement Center" is located about 100 yards from the U.S. National Security Agency, the military intelligence agency charged with ensuring the security of government computer networks.

The 32,000-square-foot center, staffed by 30 to 40 people, is one of three at which Boeing monitors its own extensive computer network, one of the largest in the world with about 250,000 users and about 1 million nodes.

It will also provide secure facilities for Boeing to meet with commercial, government, and international customers to demonstrate its integrated data analysis capabilities and new ways to marry surveillance of physical and cyber security.

Boeing is also investing heavily to develop solutions that will allow companies and government workers to use commercially available computing devices such as iPads and smart phones without exposing secure data to possible cyber attacks.

Roger Krone, president of Boeing Network and Space Systems, said the cyber center underscored the company's commitment to working with existing and future customers to defend against escalating cyber threats.

"This is an hundred year market for us," Krone said. "It's a huge inflection point."

Boeing officials said the company amassed extensive experience in cyber security after years of developing, building and defending complex weapons systems, and managing a global network for its commercial airline sales.

Other companies in the cyber security sector, including Lockheed Martin Corp (LMT.N) and Britain's BAE Systems (BAES.L), have also set up cyber centers in recent years.

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