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<p>SOURCE: © George Hall/CORBIS
T he B a s i c s o f C a p i t a l
B udge t i ng
that the company’s accounting and ﬁnancial practices
were outmoded, making it hard to determine whether
products were proﬁtable. So, she immediately set out to
devise better procedures for measuring and controlling
After reviewing the company’s $13 billion capital
budget, Hopkins concluded that $2 billion of projects
had little chance of ever being proﬁtable, and another
$1.6 billion were likely to only break even or generate
modest proﬁts at best. She developed a “value
scorecard” and used it to help kill value-reducing
projects and increase investments in proﬁtable areas.
While everyone recognizes that it is difﬁcult to
improve overnight, analysts believe that Boeing is
moving in the right direction. The company is once
again proﬁtable, and both its cash ﬂow and operating
margins have improved. Most importantly, the stock
price has rebounded sharply, and the stock is once again
trading above $60 per share.
Hopkins received considerable praise for her work at
Boeing. For this reason, the markets were surprised and
concerned when Hopkins announced in April 2000 that
she was leaving Boeing to take a similar position at
Lucent Technologies Inc. Indeed, Boeing’s stock fell
more than 5 percent the day of the announcement.
Despite this setback, Boeing has continued to vastly
outperform the market in the months following Hopkins’
oeing Co. had been struggling in recent years. In
1997, the 82-year-old company suffered its ﬁrst
loss in 50 years, and even though the overall
market was rising, its stock fell from $60 per share to
just under $30.
Boeing’s troubles were not declining sales. In fact,
sales doubled, from $23 billion in 1996 to more than
$56 billion in 1998, as Boeing aggressively outbid its
archrival Airbus for new business. However, Boeing’s
costs increased even faster than sales, and as a result,
the company lost $178 million in 1997 and barely broke
even in 1998.
Boeing has always had a strong engineerin