It's about time the United States scored a victory abroad.
Mega-defense contractor Lockheed Martin (NYSE: LMT ) learned last week that it has won the coveted contract to replace Norway's aging fleet of F-16 fighter jets, beating out Sweden's Gripen International for the honor.
Just honor?
Oh, did I not mention? In addition to bragging rights, Lockheed stands to reap as much as $20.7 billion, in exchange for selling Norway four dozen of its new F-35 Joint Strike Fighters. This number keeps shifting around, but at last report, it looks like Lockheed will get $2.5 billion up front (about $52 million a plane), with the balance trickling in over the course of the planes' expected 30-year lifetime, as Lockheed provides Norway with munitions, replacement parts, maintenance, and similar services.
This is grand news for Lockheed, which remains dogged by fears that it may have difficulty replacing revenue lost as sales of the venerable F-16 dry up. It's also good news for Lockheed partners Northrop Grumman (NYSE: NOC ) , BAE Systems, United Technologies (NYSE: UTX ) , and General Electric (NYSE: GE ) , the last two of which will be building the engines for the F-35. It's worse news for Gripen, which lost out in the competition, and EADS, which dropped out complaining that the process favored Americans.
Start, wait, start
Then again, it will be a while before the news turns into revenue. For one thing, Norway's Parliament has yet to sign off on the deal. And even when (if?) it does, the actual sales contract won't be inked until 2014 at the earliest. That's six more years in which "something" could happen to make the deal fall through. Six more years in which to negotiate the finer points of the contract -- like, say, the final price.
Foolish takeaway
Moral of the story: Lockheed shareholders may have to wait a good long while for the revenue from this contract to start rolling in. In the meantime, however, they can take comfort in a few things:
- They're now last man standing in this particular bidding war. Everything else is fine print.
- Announcing the decision, Norwegian Prime Minister Jens Stoltenberg described the F-35 as "the best fighter and it is the cheapest." Can't get better advertising copy than that.
- With this contract win under its belt, the F-35's -- and Lockheed's -- future is looking brighter than ever.
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