Boeing(NYSE: BA) investors got a bit of a shock last week, when word leaked out that the aerospace company's ailing defense and space division, known as BDS, is bracing for layoffs. This dedicated space business builds everything from rockets to satellites to missile defense systems, and manages NASA's gigantic Space Launch System (SLS) for the Artemis program -- and it's worried that the new Trump administration may be preparing to cancel future SLS contracts.
And the jobs of anywhere from 200 to 400 of the 800 staffers who work on SLS could be at risk.
Nor is Boeing alone in worrying about job security in the space industry. Bloomberg reported last week that one of the new space companies challenging Boeing's dominance in rocketry, Blue Origin, is also preparing to lay off a chunk of its workforce.
Get to know Blue Origin ... and get ready to say goodbye
As Bloomberg reports, Jeff Bezos' great big space company "is looking to cut costs and focus resources on ramping up rocket launches after years of R&D [research and development] work." Blue Origin may be planning to release anywhere from a few hundred up to 1,000 of its 14,000 employees in the layoffs -- probably even more workers than Boeing will let go.
Blue Origin's New Glenn reusable space rocket blasted into orbit last month, successful on its first try. And while at first glance, that may sound like a strange catalyst for layoffs, it's actually not the first time we've seen something like this happen in the space industry.
In November 2023, Sierra Space (another space company that may have ambitions to go public) conducted a similar pivot. With development of its Dream Chaser spaceplane completed, Sierra announced it would lay off 165 R&D workers, and replace them by hiring 150 new workers possessing security clearances, to work on missions flying Dream Chaser. Looked at this way, what Sierra Space was doing was more right-sizing and aligning its workforce to the task at hand, than laying off workers just to cut costs.
Image source: Blue Origin.
Blue Origin's master plan
Blue Origin may be planning something similar, as it works "to ramp up New Glenn flights and clear some $10 billion worth of launch contracts" it has in backlog, says Bloomberg. Reporting from The Wall Street Journal supports this interpretation.
As CEO Dave Limp wrote to employees: "Our primary focus in 2025 and beyond is to scale our manufacturing output and launch cadence." And that entails cutting "bureaucracy" and "management," especially in the company's "engineering, R&D, and program/project management" departments.
Cost-cutting is certainly one goal of this exercise. At the December 2024 New York Times DealBook Summit, founder Bezos warned that Blue Origin is "not a very good business yet" (that is, it's losing money), although he thinks that given time, it could eventually become "the best business I've been involved in."
Image source: Blue Origin.
What it means to investors
Coming from the guy who founded Amazon.com, the fifth-biggest company in America according to Motley Fool data, that's a bold prediction. Cutting costs at the same time Blue Origin converts $10 billion in backlog into revenue and profit should help to make it a reality.
What remains to be seen is whether Blue Origin will also take the next step, as Sierra Space did: expand hiring in departments that manufacture New Glenn rockets, and manage their launching and operations in space. Personally, I expect that's exactly what we'll see.
Consider the following scenario: Working from a known $10 billion backlog, and a presumed launch cost of $100 million per rocket, Blue Origin may have up to 100 future launches currently on its manifest. Now assume the company follows a standard growth curve for space companies, roughly doubling its launch cadence every year. Starting with one launch in January, and perhaps two total this year, it grows to four launches in 2026, eight in 2027, and so on. I'd say Blue Origin probably has about five to six years' worth of launches ahead, before counting any new contracts it wins in the future.
So aside from increasing the chance we'll one day be able to buy into a Blue Origin IPO, what does this imply for investors? As its motto promises (gradatim ferociter -- "step by step, ferociously"), Blue Origin is starting off slow with its New Glenn launches, but it will accelerate at quite a clip. Pressure on incumbent heavy-lift rocket companies like Arianespace (in Europe), SpaceX, and United Launch Alliance (that's Lockheed Martin(NYSE: LMT) and...the now-downsizing Boeing) is going to grow steadily over the next few years.
Precisely how bad that will be for their businesses will depend on how "ferociously" Jeff Bezos decides to compete on pricing. Stay tuned as we learn more about how much Blue Origin will charge for rides on its new megarocket.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and The New York Times Co. The Motley Fool recommends Lockheed Martin. The Motley Fool has a disclosure policy.
