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War on Terrorism Spawns Arsenal of Defense Products
The Washington Diplomat / June 2002

By Larry Luxner

Airborne lasers, Global Hawks, JSAFs, JSOW-Bs, JDAMs and Raptors. It all sounds like alphabet soup and gobbledygook to most Americans.-- but to those in the defense industry, these high-tech acronyms and weapons systems translate into big bucks.

That's especially true for companies whose products dovetail with the Bush administration's war on terrorism.

"One of the major changes since 9/11 is the performance of U.S. forces in Afghanistan, which has highlighted the effectiveness of networking weapons systems that range from sensors to bombs and missiles," said Lee Ewing, editor of Aviation Week's Aerospace Daily and Homeland Security & Defense, both published by McGraw-Hill Companies. "For the U.S. defense industry, the major procurement tied to the aftermath of the war has been for more bombs and missiles that have proven effective in Afghanistan, and also for unmanned aerial vehicles such as the Global Hawk and the Predator." Randy Belote is a spokesman for Northrop Grumman, which produces the Global Hawk aircraft.

"It's an unmanned surveillance and reconnaisance platform that has a number of sensors allowing it to provide surveillance on large areas of land," he said. "There's been a great deal of interest in Global Hawk, both in Europe and the Far East."

Belote said the aircraft costs $30 million each, and is manufactured in California. Northrop Grumman, whose Electronic Systems Sector is based in Baltimore, also makes the B-2 "Stealth" bomber, which has been a mainstay of the company's business for 10 years.

"We're in a unique position. Northrop Grumman recognized the need over a decade ago to reposition itself for systems that would respond to modern threats -- peacekeeping on the left, global conflict on the right, with terrorism in the center," he said. "These systems would provide enhanced surveillance, reconnaisance and intelligence gathering so that commanders could better understand what was happening on the battlefield."

According to Belote, about 10% of Northrop Grumman's sales are overseas, with the biggest clients being in the Middle East and the Far East. Belote declined to name specific countries or elaborate further.

He did say that the company, which employs 100,000 people in 44 states and 25 countries, would become the nation's No. 2 defense contractor if it succeeds in acquiring TRW Inc. for $6.9 billion.

On May 6, the two companies signed a confidentiality agreement that will allow Northrop Grumman to look at TRW's books. Northrop Grumman has offered to exchange each share of TRW stock with its own stock at $53, but company officials hint they may sweeten the offer after conducting due diligence.

Harris Belman, vice-president of homeland security at BAE Systems in Arlington, says his company sells $4 billion a year to the North American market, though only a small part of that has to do with homeland security and the domestic war on terrorism.

"Homeland security is very new," he said. "I don't think anybody has made hundreds of millions of dollars on homeland security, because the monty that's been allocated at the deferral level hasn't seen its way to the market yet."

Even so, notes Belman, "I'd say the market is four to five times what it was before Sept. 11. Today, it's primarily the U.S. market, but it will be an overseas market too. For instance, Japan has shown interest in our chemical detectors."

These detectors, which cost around $10,000 apiece, can be installed in everything from airports to subway systems. BAE's primary customer for the devices is the Pentagon.

"We're very big in sensor technology, everything from infrared sensors to chemical detectors. Most of what we've done has been developed for the military, and we're looking to move that into the civil/commercial arena, because the technology is there."

Yet another company benefitting from the war on terrorism is Raytheon, which reported sales of $16.8 billion last year.

About 23% of Raytheon's business is international, says company spokesman Dave Shea, noting that Australia, Saudi Arabia and the United Kingdom are among its best foreign customers.

"We make a number of the missile systems used in Afghanistan, including the Paveway series of laser-guided bombs. The Tomahawk cruise missiles, which Raytheon builds in Arizona, has also received some increased funding, so we're converting older Tomahawks to new ones equipped with Global Positioning Satellite units."

The company could suffer a setback, however. The Air Force reportedly wants to cancel its purchase of more than 3,000 of the B variant of the Raytheon Joint Standoff Weapon (JSOW-B), due to technical problems and cost overruns. According to Aerospace Daily, the Armed Services Committee report acknowledtges the Air Force's intentions and adds $16.2 million to the Bush administration's budget request to fund an extended-range version of the Lockheed Martin Wind Corrected Munitions Dispenser as an alternative to JSOW-B. The weapon is designed to be used against tanks and other heavily armored vehicles.

On the domestic front, Raytheon is one of several companies bidding on a $1 billion federal government contract to install explosive detection machines at the country's 438 airports by year's end. It is also marketing its First Responders vehicle to state governments. Shea says "this vehicle is designed to solve communications problems among various jurisdictions, enabling one jurisdiction to talk to another through satellite communications and wide-area networks."

Also helping U.S. forces with communications is Spacelink International, a $25 million company based in Washington.

In February 2001, Spacelink became one of the prime contractors on a contract valued at $2.1 billion with the Defense Information Systems Agency (DISA), an agency that falls under the jurisdiction of the Department of Defense.

"This contract was installing earth terminals in the Balkans in support of existing DOD networks and providing satellite bandwidth in Southwest Asia," said Caryn Swenson, Spacelink's director of business development.

While Spacelink doesn't contract with foreign countries, it does negotiate host-nation agreements with such countries as Saudi Arabia, Germany and Nigeria, on behalf of its customer, the U.S. government. Under a separate contract, it installs AT&T calling centers in the Balkans so U.S. troops can call their families; it also provides the communications links for cybercafes so those troops can enjoy Internet access.

Robert Baugniet is senior manager of corporate communications at Gulfstream Aerospace, a wholly owned subsidiary of General Dynamics.

"Since Sept. 11, on the commercial side, interest in our product remain very high, but decision-making has been prolonged somewhat," he says, "whereas on the military side, interest remains high, and there's been no delay in the decision-making process."

Baugniet, who declined to reveal dollar figures, says that since 1960, governments have used Gulfstream jets for a variety of applications. These include VIP transport, maritime reconnaisance, drug interdiction, electronic surveillance, medical evacuation and the movement of time-sensitive parts and materials. Since the jets fly at altitudes of 45,000 to 55,000 feet -- well above commercial jet traffic -- the Gulfstreams are also useful for conducting atmospheric research.

The company, which is based in Savannah, Ga., recently won a $1.6 billion contract to provide 20 jets to the U.S. Air Force over a 10-year period. Baugniet says over 140 Gulfstream aircraft have been sold to governments around the world, including those of Israel, Norway and Japan.

The new focus on homeland security has not only helped defense contractors. It's also been a boost for at least one publishing conglomerate, McGraw-Hill Companies, which recently launched a new weekly newsletter, Homeland Security & Defense.

Ewing, who was already editing Aerospace Daily,said the newsletter -- which costs $595 a year -- is exceeding the company's original expectations.

"I started work on the idea of a homeland security newsletter in November 2000, and started covering hearings early in 2001," he said. "The idea was to learn more about the subject matter, which was of growing importance but had not attracted national attention. Later in the year, I drafted ideas for several new products and services. This was all written up long before Sept. 11."

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