Orbital Unshackles ATK’s Sporting Goods from Defense Doldrums

• ATK announced they would split into two companies, followed by a merger of the resulting aerospace and defense arm with Orbital. The resulting company, to be named Orbital ATK, will have 13,000 employees for $4.5B in yearly revenue. ATK’s sporting good business has been booming of late while defense sales were struggling. ATK statement | Orbital statement.

US Navy Is Working on Requirements for Low Rate Production of Anti-Mine Vehicles

• The US Navy is working on an RFP for up to 18 Remote Minehunting System (RMS) Remote Multi-Mission Vehicles (RMMV), part of the LCS’ MCM mission module. An industry day took place a month ago, and briefing material has been trickling in (including this Q&A) since then on the FBO website.

US Back in the Philippines

• The Philippines and the US are signing today a 10-year military pact formalizing how American troops will be allowed to rotate in the former US colony. Video of the press conference with Presidents Aquino and Obama.

• President Aquino announced last Friday the purchase of 8 combat utility helicopters, six close air support aircraft, two-long range patrol aircraft, and radar systems, according to the Philippine Daily Inquirer.

• WSJ: U.S. Beefs Up Military Options for China as Obama Reassures Allies in Asia.

• IHS Jane’s notes that three is a trend: attacks on oil tanker in the Malacca Straits indicate pirates’ increased organisational capability.
  

JPADS: Making Precision Air-Drops a Reality

Strong’s JPADS,
Afghanistan

The dilemma for airdropping supplies has always been a stark one. High-altitude airdrops often go badly astray and become useless or even counter-productive. Low-level paradrops face significant dangers from enemy fire, and reduce delivery range. Can this dilemma be broken?

The US military believed that modern technologies could allow them to break the dilemma. The idea? Use the same GPS-guidance that enables precision strikes from JDAM bombs, coupled with software that acts as a flight control system for parachutes. JPADS (the Joint Precision Air-Drop System) has been combat-tested successfully in Iraq and Afghanistan, after moving beyond the test stage in the USA… and elsewhere.

NATO’s Future AWACS Replacement: Desires vs. Reality

• NATO realizes they’ll need to replace their invaluable NE-3A AWACS fleet around 2030. At this stage, everyone naturally wants everything, including a missile defense role. Budget realities and remorseless demographics ensure that they’ll buy what’s available off the shelf. That’s probably good news for Boeing’s E-737 AEW&C.

US Primes Continue “Earning Massagement” to Counter Declining Sales

• Northrop Grumman reported Q1 2014 sales down 4.2% to $5.85B, with all business segments losing between 3% and 6% of their revenue vs. same time last year. This looks relatively close to Lockheed Martin’s revenue outlook for the quarter. Total backlog slipped by $800M to $36.2B.

• Boeing on the other hand is still growing strongly, with Q1 revenue up 8% to $20.5B, thanks to commercial airplanes deliveries up 18% in volume. Boeing Defense, Space & Security sales lost 6% to $7.6B because of fewer P-8 deliveries (and that aircraft will continue to see lower volumes than earlier expected).

• Raytheon’s Q1 sales dropped by 6% to $5.88B, with all segments posting lower sales than last year. Total backlog lost $1.5B to $32.2B (70.7% funded).

• General Dynamics saw its Q1 revenue shed 1.1% to $7.3B, with aerospace sales booming by almost 20% while combat systems lost more than 15%. Total backlog grew by more than 20% to $84.7B, led by a $10B order from Saudi Arabia via Canada.

• Overall, US primes have continued to shed staff and buy back shares to smooth their earnings. Such earning management / massaging is common at large public companies to meet investor expectations. However the likes of Reuters should know better than lead with misleading headlines such as “strong U.S. defense firm profits defy regular gloomy warnings.” Sure, there is always room for further operational efficiency in any large organization. But the fact of the matter is that defense services sales have been facing several years of sequential decreases, while armament sales abroad are so far not meeting expectations set for booming exports. Watch the top line, not just bottom line artificial metrics such as earnings per share. Even large primes can’t avoid the reality of US defense budgets being past their two-war peak.
  

Lockheed Martin Feels the Pinch

• Lockheed Martin’s Q1 2014 sales were down 4% Y/Y to $10.65B. Aeronautics stood out as the one segment whose revenue grew this quarter, mostly thanks to the F-35 and C-5. Information systems and Mission systems sales on the other hand were down by 9% and 11% respectively, as a number of programs wind down or see decreased volume. Of late the company has been making acquisitions in an effort to reduce its current overwhelming reliance on defense.

Taliban Election Attacks Weak Enough to Conclude Afghans Can Protect Themselves?

• Reuters reports that the U.S. force in Afghanistan may be cut to less than 10,000 troops because the Taliban were not able to disrupt the April 5 elections.

Japan to Fly Self-Made Stealth Fighter Prototype by End of 2014

• Japan’s ministry of defense expects Mitsubishi’s ATD-X Shinshin stealth fighter to start test flights later this year, a few months behind schedule. Mitsubishi’s long history of local fighter jet production was interrupted only recently.

West, Russia Jaw-Jaw Another Toothless Agreement over Ukraine

• BBC: Ukraine crisis: Deal to ‘de-escalate’ agreed in Geneva.

• USA Today: Obama skeptical over Ukraine deal.

• FT: Russia’s Vladimir Putin still has friends in the west. A fact Russia’s ITAR-TASS news agency is quick to highlight.

• CBS/AP: Pro-Russian separatists in eastern Ukraine thumb noses at interim deal.

• Kyiv Post: Security Service of Ukraine ramping up security operations in Kharkiv Oblast, plans to cordon off separatists in Donetsk.

• RIA Novosti: Russian Defense Ministry Placed $140M Order at Crimean Shipyard. Earlier this week the ministry had announced a $470M contract for 16 MiG-29 SMTs.