Sendmail localhost.localdomain issue

I was having trouble with a particular server identifying itself as localhost.localdomain
Finally I figured out the solution was to edit the /etc/hosts file and change the line with 127.0.0.1 to have only the first portion of the hostname and not the FQDN. Then I also listed that first portion on another line with the LAN ip address. After that the server identified itself correctly on the HELO line.