Boeing to Acquire Hughes’ Space and Communications Businesses

The Boeing Company and Hughes
Electronics Corporation today announced that Boeing will acquire
Hughes’ space and communications business and related operations for a value
of $3.75 billion in cash.

This transaction will boost Boeing’s space and communications revenues and
earnings by more than a third and will provide for significant future growth.
It will be accretive to earnings per share in its first full year of
operations, 2001.
The Hughes businesses, which anticipate 1999 revenues of
$2.3 billion, when added to Boeing’s space and communications operations, will
initially create an entity with annual revenues approaching $10 billion.

“Boeing intends to be number one in space.
This acquisition is a
significant step forward in executing our goal of becoming the industry leader
in integrated, space-based information and communications,” said Phil Condit,
Boeing chairman and chief executive officer.
“It is an excellent strategic
fit with substantial synergies.”

Industry projections indicate that the space and communications market
will grow from its current $40 billion to $120 billion annually by 2010,
primarily driven by growth in commercial and government information and
communications systems and services.
Boeing is focusing its growth in space
and communications in areas that include classified government program
opportunities, new space-based air traffic management systems, the movement of
broadband information on and off mobile platforms, and integrated military
battlefield and defense systems.

Hughes is the technological world leader in space-based communications,
reconnaissance, surveillance and imaging systems.
It is also the world’s
leading manufacturer of communications satellites, having built nearly
40 percent of those in operation.
Hughes currently has a backlog of more than
36 satellites valued at more than $4 billion.

Under the definitive agreement, Boeing also will acquire Hughes Electron
Dynamics, a leading supplier of electronic components for satellites, and
Spectrolab, a premier provider of solar cells and panels for satellites.
The
three businesses have a combined workforce of about 9,000 employees, primarily
in the Los Angeles area.
Boeing is currently the largest private employer in
California with a workforce of 36,700.
Today’s transaction is subject to
regulatory and government reviews and is expected to be finalized by the end
of the second quarter.

The new business unit, to be named Boeing Satellite Systems, will be part
of Boeing’s Space and Communications group, led by President Jim Albaugh.
Boeing Satellite Systems will be headquartered in El Segundo, Calif., under
the leadership of Tig Krekel, currently the president of Hughes Space and
Communications.

“We’ve worked closely with the Hughes organization over the past several
years and are well acquainted with their technological prowess,” Albaugh said.
“With the talent Tig and his group will bring to our team, Boeing will have an
unmatched capability to integrate space, air and terrestrial information, and
communications systems.”

Boeing’s Space and Communications group features an array of advanced
technology products in four major markets:
launch services, information and
communications, human space flight and exploration, and missile defense and
space control.
Boeing is NASA’s leading contractor, the lead integrator for
the 16-nation International Space Station, the builder of the Delta family of
launch vehicles and the lead systems integrator for the National Missile
Defense program.
It also designs and builds advanced Rocketdyne rocket
propulsion systems and is developing the next generation of global positioning
system satellites, known as GPS IIF.
Boeing is a partner in Sea Launch, the
four-nation joint venture that launches satellites from a floating platform in
the Pacific near the equator.

The Boeing Company, headquartered in Seattle, is the largest aerospace
company in the world and the United States’ leading exporter.
It is the
world’s largest manufacturer of commercial jetliners and military aircraft,
and the largest NASA contractor.
The company’s capabilities in aerospace also
include rotorcraft, electronic and defense systems, missiles, rocket engines,
launch vehicles, and advanced information and communication systems.
The
company has an extensive global reach with customers in 145 countries and
manufacturing operations throughout the United States, Canada and Australia.
At year-end 1999, Boeing and its subsidiaries employed 197,100 people.

Forward-Looking Information Is Subject to Risk and Uncertainty

Certain statements in this release contain “forward-looking” information
that involves risk and uncertainty, including projections for revenues,
earnings, earnings per share, market growth, completion of government and
regulatory reviews and receipt of necessary approvals, statements regarding
goals, and other trend projections.
This forward-looking information is based
upon a number of assumptions including assumptions regarding demand; internal
performance; customer, supplier and subcontractor performance; and government
policies and actions.
Actual future results and trends may differ materially
depending on a variety of factors, including the company’s successful
execution of internal performance plans including research and development,
production system initiatives, asset management plans, procurement plans, and
other cost-reduction efforts; the cyclical nature of the company’s business,
volatility of the market for certain products, future integration of Hughes’
space and communications business and related operations; product performance
risks; action by regulatory agencies in regard to the proposed acquisition,
and other regulatory uncertainties; collective bargaining labor disputes;
performance issues with key suppliers, subcontractors and customers;
governmental export and import policies; global trade policies; worldwide
political stability and economic conditions; changing priorities or reductions
in the U.S. Government or foreign government defense and space budgets;
termination of government contracts due to unilateral government action or
failure to perform; and legal proceedings.
Additional information regarding
these factors is contained in the company’s Annual Report on Form 10-K for the
year ended 1998 and Form 10-Q for the quarterly period ended
September 30, 1999.