How Boeing's jumbo gamble could pay off

By Jon Markman

Sometimes, it takes only a single product to launch a company to the next level. One insanely great idea, to paraphrase Steve Jobs, to spark customers' and investors' imaginations, and to ignite a multiyear rally in shares.

For Apple (AAPL, news, msgs), it was the iPod/iTunes combo. For Chipotle Mexican Grill (CMG, news, msgs), an all-natural burrito. For Crocs (CROX, news, msgs), those amazing plastic shoes.

For Boeing (BA, news, msgs), it is a product about 100,000 times larger, the Dreamliner 787 commercial jetliner. And yet there is also a jumbo-jet-sized difference between the first three rally-sparking ideas and Boeing's.

Apple, Chipotle and Crocs all reaped the benefit of their innovations after they had been released and enjoyed by the public. In contrast, Boeing shares have risen fourfold in the past four years even though it hasn't built a single, complete, commercial 787 at the target weight for a customer yet, much less delivered one.

Mind-blowing complexity

I know it sounds crazy, but what do you expect from Wall Street? Always counting chickens before they hatch. And so now the burning question on the minds of investors is simple: Will the Dreamliner emerge from the most complex manufacturing assembly line in history to make its three critical dates with history -- a factory rollout on numerically auspicious 7/8/07, a maiden flight in late August and first delivery in May 2008 -- without a hitch, or will Boeing be forced to delay at some point due to supply-chain or engineering stumbles?

If the schedule slips -- as some veteran observers still expect due to the mind-blowing complexity of the project -- you are going to see this stock come in for one heck of a hard landing. And don't think it can't happen.

There's plenty of big money betting right now on both sides of the line, with a longtime industry analyst from Citigroup (C, news, msgs) warning investors to sell their shares now before a 25% collapse, while analysts at Bank of America (BAC, news, msgs) and elsewhere are telling investors to load up now before the next leg higher.

It might be useful to think of the next three months as the aerospace equivalent of that nail-biting period just before an approval decision from the Food and Drug Administration on a new biotech therapy. So buckle your seat belts and prepare for a high-volatility event, because Boeing shares are on track to react with a big move this summer, one way or the other.

Best of the best

My bet? About a year ago, I came down on the side of the doubters, but in December I came around to believe the company will hit its marks and crush the bears. In fact, I'll go farther now and call Boeing the greatest U.S. manufacturer of all time, considering it has beaten back all domestic and foreign rivals to become the rarest of entities: a monopoly that has evaded the government's usual trust-busting impulse and pushed the envelope on both innovation and profitability. Look for shares to double again over the next 40 months.

• Video: The Boeing Dreamliner

Best ever? Why not. The Dreamliner, if it works as planned, is an unbelievably audacious gamble that planes can be built out of lightweight composite materials instead of heavy metal, that they can use two different manufacturers' engines interchangeably, that they can sport the largest windows ever inserted in planes, that they can be built in pieces at plants from Italy to Japan and then assembled in a single Washington state hangar, that they can fly more quietly and farther on less fuel than ever before -- and that they can be churned out at the unprecedented rate of one every three days.

The 787 is already the most successful new plane in aviation history, with $80 billion in orders on the books, so at the very least you've got to tip your cap to a sales staff that could vend a $175 million item to customers before they could touch or test it. The only four manufacturers that can compete with Boeing for the crown of best U.S. industrial manufacturer ever are General Electric (GE, news, msgs), United Technologies (UTX, news, msgs), 3M (MMM, news, msgs) and Intel (INTC, news, msgs), and yet none of them has so thoroughly dominated in such a difficult global business by taking such big risks.

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