Defense industry maintains summertime momentum
Positive financials and continuing contract activity; dark days ahead?
Despite the ongoing uncertainty with defense expenditure facing challenges and the threat of sequestration hanging over US companies there was positive news on the financial front as companies finished releasing results for the second quarter of the calendar year. Taking a snapshot of financial results and looking at quarterly revenue growth over the second and first quarters shows a turnaround with companies growing revenue as opposed to the quarter-to-quarter revenue declines observed after the first quarter of 2012.
There was also plenty of activity in August including new product launches, technology demonstrations and contracts as well as business acquisitions.
Amongst the business deals concluded in August, Mercury Computer Systems completed its acquisition of Micronetics, allowing the company to continue solidifying a portfolio of offerings that will now include RF capabilities. Meanwhile, BAE Systems signed a MoU with MASS to work on EW systems for the export market. The partnership is designed to offer customers electronic warfare training and data management, operational analysis, countermeasure development, mission data validation and mission evaluation.
There were also a number of announcements in the area of UAVs, with for example, an emphasis on developing secure communications. Northrop Grumman awarded Cubic Communications a contract to produce a new multiband digital data link system for the MQ-8C Fire Scout unmanned helicopter which will feature the ability to transmit Ku- and C-band transmissions at the same time. Expanding the role of UAVs with the addition of weapons is also being actively pursued and Raytheon completed a successful warhead and guidance system test of its Pyros small tactical munitions to validate the weapon's semi-active laser and GPSguidance modes.
In July one of the notable events was NETMA issuing an RfPto Eurofighter GmbH for the development of an AESA Radar (E-scan). Officials said the target is to have a contract by the middle of next year and to have an E-Scan entering into service by 2015. The contract would mean development of the radar would come early next year with Eurofighter and Euroradar, the Selex Galileo-led consortium supplying radars for the Typhoon. The other European fighter, the Saab Gripen NG aircraft is now flying with a SELEX Galileo Raven ES-05 AESA fire control radar installed.
In August, there was considerable activity for naval radar platforms that included Lockheed Martin submitting its final proposal to the US Navy to design, build, integrate and test the new Air and Missile Defense Radar (AMDR) S-band radar and radar suite controller for the future DDG-51 Flight III class destroyer.
At the component level, Northrop Grumman demonstrated an 850 GHz integrated receiver under Phase 2 of the DARPA Terahertz Electronics program, setting a new performance record. Under Phase 1, the company had already developed a Terahertz Monolithic Integrated Circuit that operated at 670 GHz in 2010. In addition to demonstrating low-noise integrated receivers, the company also developed and tested LNAs and PAs. Meanwhile, M/A-COM introduced a 40W GaN-on-SiC transistor suitable for S-band military radar. Perhaps more importantly, M/A-COM was suggesting that the MAGX-002735-040L00 will provide an MTTF of 600 years or better based on HTOL RF accelerated life testing.
In conclusion, the summer period was arguably quite upbeat for the defense industry with financials looking positive and plenty of activity in terms of new product launches, technology demonstrations, contracts as well as mergers and acquisitions. Whether this momentum can be maintained as the year draws to a close will be dependent on how well companies are able or perhaps in some cases allowed to adapt to a changing environment and proactively seek out opportunities away from their traditional territories.