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Think the U.S. military is conservative? All strait-laced, polished brass, and spit-shined? Well, think again -- and allow me to introduce you to U.S. Navy Admiral Gary Roughead, Chief of Naval Operations and a four-star wild and crazy guy.
Speaking before the Brookings Institution in Washington, D.C., yesterday, Adm. Roughead (gotta love that name) opened fire on conservative-think in the military, declaring "I tend not to want to put things off. I'd rather put a little pressure on the system and get things done."
What things, exactly?
Specifically, the admiral wants to cut loose on the Pentagon's strait-laced acquisition rules and begin buying cutting-edge tech for the Navy -- even if it hasn't, technically, jumped through all the usual testing hoops. Case in point: Northrop Grumman's (NYSE: NOC ) new Fire Scout remote-controlled helicopter. Even before the Fire Scout had passed all of its tests, Roughead had the gizmo drafted for service in the eastern Pacific, where it's currently being put through its paces aboard a U.S. Navy aircraft carrier.
Roughead describes the whirlybird as performing "wonderfully," and he hopes to move forward on a range of similarly not-yet-ready-for-prime-time tech, including:
- The Unmanned Combat Aerial System (UCAS), a program that would create an unmanned bomber capable of taking off from carriers.
- Autonomous underwater vehicles, which Roughead says are already more advanced in their technological abilities than the Navy had hoped.
Peering down from the crow's nest, the Admiral declared that sometimes it's better to take a system that's 90% proven, put it into operation and see what improvements might be helpful, rather than test, and retest, and field a system 100% ready for ... what turns out to be the wrong mission.
But what's it mean to investors?
Simply this: The Obama administration taketh away programs on one hand, but it also giveth us some new ones to invest in. The Navy's biggest UAV foray right now looks to be STUAS/Tier II, where Boeing (NYSE: BA ) leads the pack in the race to replace the venerable ScanEagle.
But Adm. Roughead's pronouncements suggest we could see revenues flow to iRobot's (Nasdaq: IRBT ) autonomous underwater vehicle (AUV) program sooner than expected. It suggests, too, an acceleration of the UCAS contract that Northrop won back in 2007 (with a little help from its friends, General Electric (NYSE: GE ) , Honeywell (NYSE: HON ) , Lockheed Martin (NYSE: LMT ) , and United Technologies (NYSE: UTX ) ).
While the UCAS contract might be forgotten as it undergoes a long testing schedule, Adm. Roughead's comments show it'll be ready for prime time sooner than expected. Combine his comments about the UCAS program with positive ones from Northrop's management on its latest conference call, and things are looking up for the project. A fleet of unmanned precision bombers inching closer to reality should have Northrop -- and its partners -- licking their chops at the profit potential.