French defense electronics group Thales announced a modest 2.5% rise in net profit for 2005 to EUR 334 million, while announcing plans to go on the offensive in foreign markets with a EUR 1 billion ($1.19 billion at current conversion) fund for acquisitions. In its news release, Thales noted that its “ambition, as compared to its current position, is to achieve, by 2008, a 25 percent growth in revenues, 15 percent from organic growth and the remainder through acquisitions”.
The firm may already have begun. In December, DID covered Thales’ deal with French state-owned naval shipyards DCN, giving it a 25% stake in the company (note that Thales is itself 31.3% owned by the French state). The company also revealed its intention to buy the 50% of Australia’s ADI recently, conditional on the approval of Australia’s Foreign Investment Review Board (see ADI release, PDF format). This would complete its takeover of Australia’s largest military manufacturer, and extend the firm’s drive to expand its Pacific Rim operations and sales.
European defense industry giant EADS recently announced its FY 2005 results. Amidst a year that saw it close out a deal for 10% of Russia’s SU-30 source Irkut Corp., buy Atlas Elektronik from BAE, and open an Alabama facility to help it focus on the US market, Revenues were up only 8% to EUR 34.2 billion. Yet EBIT pre-goodwill impairment and exceptionals was up 17% to EUR 2.85 billion, and Net Income rose 39% to EUR 1.7 billion. EADS’ Airbus civil aircraft segment was largely responsible for these results, accompanied by a combination of modest gains and modest losses in its defense and space businesses. EADS Eurocopter, which includes military and civilian aircraft but is tilted toward the civilian side, saw EBIT rise about 6% to EUR 212 million while revenues increased by 15% to EUR 3.21 billion.
EADS also announced that FY 2006 revenues were expected to exceed EUR 37 billion, with 2006 EBIT expected to grow to between EUR 3.2-3.4 billion. See the full release for complete figures and more in-depth breakdowns.
The Headquarters Aeronautical Systems Center in Wright-Patterson Air Force Base, OH recently awarded a pair of firm-fixed-price, cost-plus fixed-fee contract modifications related to the F-22A Raptor fighter.
Both are undefinitized contract actions.
F119 Engine: Vectored Thrust
Lockheed Martin Corp. in Fort Worth, TX received a $383.5 million modification to increase Lot 6 F-22 production long lead activities, (including target price curve and diminishing manufacturing sources); and long-lead performance-based agile logistics support activities; and the aircraft structural integrity program. Work will be complete December 2006 (FA8611-05-C-2850/P00009).
United Technologies Corp. subsidiary Pratt and Whitney Aircraft Group in East Hartford, CT received a $153.5 modification that will support the F119 Engines Lot 6, Long Lead Items and Field Support and Training period of performance extension. Solicitations began July 2005, negotiations are expected to be complete May 2006, and work will be complete December 2006 (FA8611-05-C-2851).
Charles Clark of Pratt & Whitney Rocketdyne has an interesting article in EDN Magazine called “Parts Are Parts,” discussing the trend toward Commercial Off The Shelf (COTS) electronics for military systems, and some of the additional work and potential pitfalls one inevitably encounters when using them in military systems. Interesting point about the problem with tin as a substitute in lead-free components, too. As he explains: “Properly screened and tested inexpensive commercial parts are viable alternatives to the virtually extinct military- and space-rated component types. But the old adage remains true: “If you want economy, you have to pay for it.” Read the full article.
Meanwhile, Geoffrey James has an article called “The war at home” in Electronic Business Online, discussing how the war in Iraq is changing the relationship between defense and commercial electronics – and how the move toward network-centric warfare will affect the US semiconductor industry. The problems with sand damage that we discussed earlier today is not confined to vehicles; and the maintenance overhand will hit the electronics field all the harder because much of the damaged gear isn’t made any more and so can’t be repaired. James draws upon a variety of industry surveys and reports, and notes that one of the big spinoffs of NCW in the USA will be the need for defense contractors and mainstream semiconductor/ electronics firms to find improved ways of working together, on multiple fronts. Read the full article.
India Defence reports that India’s President Dr. A P J Abdul Kalam recently dedicated the Army Wide Area Network (AWAN), which has been designed to connect all Army formations, units, training establishments and logistic installations in the country. Kalam congratulated the team of Corps of signals and Tata Consultancy Services for undertaking this project and completing it in time across 174 signal centres. AWAN will replace the existing 1980s technology message handling network called Automatic Message Switching System. It will provide secure and direct information exchange without intermediate handling or intervention, and will enable data exchange services including audio and video.
Dr. Kalam added that AWAN may encompass the entire defence service and interlink with other government departments dealing with national security and crisis response. Minister of State for Defence Shri M Pallam Raju, in turn, discussed AWAN in terms of information superiority as a force multiplier and Network enabled warfare. The Chief of Army Staff Gen. J J Singh, meanwhile, described AWAN as amongst the first major initiatives undertaken to prepare Indian Army for fighting in the digital battle space.
As in the Soviet Union, however, the official budget and the real budget are not the same thing. While RAND’s Project Air Force, which has also studed China’s arms industry modernization, estimates the 2004 Chinese military budget at $65-79 billion in FY 2001 dollars, but note that at 2% inflation, this would equal $76-86 billion in FY 2006 dollars. Walker’s sources are closer to $100 billion, which is about right since increases of 12% and then 14.7% give a range of $96-110 billion. Officials from the Pentagon and from India’s RAW (Research and Analysis Wing) intelligence service agree the Chinese defense budget is now the second largest in the world.
Davis Constructors & Engineers Inc. in Anchorage, AK received a $43 million firm-fixed-price contract for construction of replacement family housing at Fort Richardson, Alaska. Work is expected to be completed by Oct. 31, 2008. There were 22 bids solicited on Oct. 12, 2005, and one bid was received. The U.S. Army Engineer District at Elmendorf Air Force Base, AK issued the contract (W911KB-06-C-0005).