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Boeing to Buy L.A. Technical Graphics Firm

August 03, 2000|From Times Staff and Bloomberg News

Boeing Co. agreed Wednesday to buy Continental Graphics Corp., a privately held Los Angeles producer of aircraft technical readouts, to help bolster the aerospace giant's growing support services for commercial airplanes.

Seattle-based Boeing's proposed purchase of Continental, the terms of which were not disclosed, would allow Boeing to sell more repair and parts management data to its airline customers.

"It fits in with the strategy of growing the maintenance and aftermarket portion of their business," said Peter Jacobs, an analyst at Ragen MacKenzie Group Inc., who has an "accumulate" rating on the stock. "It has higher growth potential, but it's a much smaller piece of their business."

Boeing forecasts that the support-services market will grow to $2.6 trillion over the next 20 years, although it has not said how much of that market it hopes to capture. Getting airlines to pay Boeing to repair and maintain as well as produce airplanes could be highly profitable for the company, executives have said.

Continental's data graphics unit uses computer software to track repairs and modifications on large systems such as aircraft, trucks and oil exploration rigs. The company has 1,550 workers at offices in Los Angeles, Culver City, Santa Ana and San Diego, as well as in Britain and Germany. It had 1999 sales of $135.6 million and delivers aircraft readouts to nearly 100 airlines each month. The company was founded in 1931.

Although Boeing is Continental's largest customer, the graphics company also does business with Britain's BAE Systems and the German member of the European Aeronautics Defense & Space Co., which are joint owners of Airbus Industrie, Boeing's rival in the commercial aircraft market.

A spokesman for Boeing said Continental's business relationship with Airbus was not a concern because the data Continental handles is not "competitively sensitive."

No work force changes at Continental are planned after the acquisition, said company spokesman Dick Schleh.

Boeing formed a new division last year in an effort to increase sales for support services, such as overhaul and maintenance, as more airlines seek to farm out support work. Analysts estimated the division could generate an extra $1 billion to $2 billion in annual sales for Boeing over three to five years.

Boeing shares rose $1.19 to close at $49.88 on the New York Stock Exchange.

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* BOEING PENALTY

The FAA proposed fining Boeing $1.24 million. C1

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