Rockwell Collins Revenue Surpasses Expectations as CEO Turns to IMS Expansion

By Juliet Van Wagenen | April 24, 2015
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Rockwell Collins CEO Kelly Ortberg
Rockwell Collins CEO Kelly Ortberg. Photo: Rockwell Collins

[Avionics Today 04-24-2015] With Rockwell Collins’ profits rising 6.5 percent in their latest earnings report, the company remains optimistic on several fronts as their upward momentum continues. In a conference call yesterday for the second quarter of 2015, Rockwell Collins CEO Kelly Ortberg expressed positive outlooks for the year, hinted at further expansion in the connectivity-focused Information Management Services (IMS) division, and even seemed bullish on coming profits in the business jet and government sectors.

“There’s a groundswell of energy and excitement across our company driven by our strong positions, our opportunities for global growth and expectations for overall upward trajectory,” Ortberg told investors and journalists on the call.

The company is steadily moving forward with its profitable connectivity segment, the IMS division, which last year saw the full integration of international trip planning company ARINC Direct purchased to reduce reliance on government contracts and capitalize on the growing In-Flight Connectivity (IFC) market. Rockwell Collins quickly followed the ARINC integration with the acquisition of Singapore-based Pacific Avionics just last month.

“Pacific Avionics enables the wireless distribution of digital information on board an aircraft,” Ortberg said. “We’ve got the IMS organization that allows us to provide the services. We’ve got the onboard equipment for in-flight entertainment. We did not have a product offering for this wireless distribution, that’s where Pacific Avionics comes in.”

The acquisitions are paying off as the company saw a 4 percent increase in the IMS segment. The new division looks to offer services to the single-aisle aircraft market that will enable the ability to stream video content to more than 250 passengers simultaneously alongside flexible architecture that can support an array of applications, services and faster wireless speeds onboard the aircraft. As the company continues to capitalize on the growing In-Flight Entertainment and Connectivity (IFEC) market, they promise further expansion in the sector in the way of acquisitions, although they admit they’d like to be moving more quickly in picking up companies.

“I’ve said publicly that I wish we were a little faster at moving these,” said Ortberg, noting that most companies, as with Pacific Avionics, are small, privately owned organizations that require “nurturing to make the deal happen.” Still, the Pacific addition is a sign of more to come.

“While this acquisition is going to sit in our commercial portfolio this is a part of our overall strategy to provide information offerings. So you can envision in the future where we’re providing not just the in-seat video equipment but also the onboard wireless distribution as well as the connectivity service, and we’ve been expanding in our market reach there to provide the cabin connectivity service,” said Ortberg. “So you can see in the future where we’re providing a much broader, fuller suite of offerings to our customers going forward.”

Outside of the recent acquisition, Rockwell Collins has also introduced several connectivity-dependent services in the past few months, including its multilink flight tracking service as well as a Memorandum of Understanding (MOU) with One Web to develop satcom terminals for its global aviation broadband service and distribute the network, among others.

Connectivity aside, Ortberg also sees possible opportunity again in the military sector as a result of the political climate. In the second quarter, sales in the government systems segment rose 2.3 percent, ringing in at $567 million.

“We continue to believe the U.S. defense budget is bottoming out and should at least return to inflationary levels of growth even in a sequester environment,” said Ortberg. “As we’ve all seen over the course of the past year the world isn’t getting any safer and depending on how these budget deliberations in Washington end up, we may have even some upside to our sequester-driven outlook.”

By 2018, the company expects the government segment to contribute to 35 percent of overall revenue — up three percentage points from last year. Overall, revenue rose to 1.34 billion, and Ortberg is outwardly confident the trend will continue.

“Last year our top priority was to return the company to growth after we had been significantly impacted by the [Department of Defense] DOD and biz jet cycles. And, while last year was the inflection point as we did return the company to top line growth, I’m confident that fiscal 2015 will undoubtedly be recognized as the year we regained our stride.”

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