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Northrop to Air Travelers: SAM Is Not Your Friend

So far as I can tell, the news from Wednesday didn't even get a press release. No one's talking much about it, but for investors in Northrop Grumman (NYSE: NOC  ) , it could be worth billions of dollars in new revenue.

What am I talking about? Northrop's latest solution to the growing problem of very bad guys, with very big guns, trying to kill you while you're innocently flying from Point A to Point B. Take a stroll with me, dear Fool, back several years and across a couple of continents. In 2002, an Israeli passenger liner was taking off from the airport at Mombasa, Kenya, when terrorists tried to shoot it out of the sky with a Russian-made Strela-2 surface-to-air missile (SAM). That attempt failed, but according to The New York Times, over the years, more than two dozen civilian aircraft have not been so lucky.

The problem of bad guys shooting at commercial airliners quite naturally makes air travelers nervous. If you think Delta (NYSE: DAL  ) , Northwest (NYSE: NWA  ) , and JetBlue (Nasdaq: JBLU  ) are struggling with the dilemma of earning a profit in an era of $100-plus oil, just imagine what will happen to their businesses when someone uses a SAM to attack a plane here in the U.S. Whether or not it's successful, people are going to be spooked. And so, for several years now, the U.S. government has been asking defense contractors to come up with an effective, and cost-effective, way to protect commercial airliners.

In past articles, I've focused primarily on Raytheon's (NYSE: RTN  ) "Vigilant Eagle" solution to the problem -- whereby Raytheon would ring high-traffic airports with an area defense system. Apparently, BAE Systems is also looking at this problem. This week, though, belongs to Northrop, which on Wednesday announced that its Guardian system -- a heat-seeking, missile-jamming "pod" that can be attached and detached from individual planes as needed -- is ready for prime time.

Northrop has just completed more than a year's worth of successfully testing the Guardian to defeat test attacks on FedEx (NYSE: FDX  ) aircraft. While no sales have yet been booked, Northrop believes that if it gets enough orders to produce the devices in bulk, it will be able to keep prices down near its target of $1 million apiece. With thousands of civilian planes in the air at any given moment, each one a potential terrorist target, you can easily see how this works out to a billion-dollar-plus market for Northrop.

So congratulations are in order, Northrop. Glad to hear that the Guardian works. Don't forget to drop us a note when you succeed in selling a few of the things.

For more on the people trying to keep safe distance between you and SAM, read:

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10/21/2016 2:50 PM
NOC $216.23 Down -1.14 -0.52%
Northrop Grumman CAPS Rating: ****
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JBLU $18.48 Down -0.13 -0.67%
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RTN $137.12 Down -0.19 -0.14%
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