Tuesday's been a slow news day in defense-land, but a few announcements should catch Foolish investors' eyes. L-3 (NYSE: LLL ) sold $44 million worth of thermal sights to the Marines. (Yawn.) Lockheed (NYSE: LMT ) has a new laser guidance kit to improve the accuracy of 70mm rockets. (That's nice.) And then there's the big news -- which may not look it at first glance.
Raytheon (NYSE: RTN )
Raytheon delivered the second-generation version of its "Active Denial System" (dubbed ADS-2) to the U.S. Air Force. The delivery, which took place at the end of August, was just announced today. ADS-2 takes a page from TASER's (Nasdaq: TASR ) playbook, aiming to control human targets without killing them.
Where TASER does this on a person-to-person basis, by shooting darts that mildly electrocute its target, ADS-2 targets mass groupings of angry people with a wide beam of electromagnetic energy. The beam, like a microwave oven pointed outward, causes an intense burning sensation in humans. Its makers hope that, upon feeling pain, its targets will move away from the sensation, dispersing the crowd.
By most accounts, ADS-2 does not cause actual physical harm. The "millimeter wave" energy it uses was chosen because it cannot penetrate deeply enough into the human body to cause lasting injury. It does, however, excite water molecules in the surface layers of the skin, creating a sensation that has been described as "a [lit] light bulb being pressed against the skin." However, the weapon has generated heated debate (pardon the pun).
While admitting that the weapon may work fine for its intended purpose, just as TASER's do, critics have speculated on its side effects -- for example, the risk that ADS-2 could also be used as an instrument of torture, one that leaves no evidence of its effects. The Air Force's decision to accept delivery, however, suggests that Raytheon just might get a return on its investment in developing this technology, criticism notwithstanding.
AeroVironment (Nasdaq: AVAV )
Next up, the recent IPO that's making waves in both unmanned aerial vehicles (UAVs) and the hybrid revolution: AeroVironment. At first glance, today's news from AV may not seem so significant. At $2.4 million, the firm's just-announced sale of a dozen Raven B Unmanned Aircraft Systems (inexplicably abbreviated UAS, in contrast to the larger pilotless planes known as UAVs) to the Danish Jaegerkorpset (Army Special Forces) amounts to just more than 1% of the firm's annual revenue.
But like the man said, a journey of a thousand miles begins with one step, and today's announced sale could be a prelude to bigger and better orders from the Danes in years to come. Moreover, every time AeroVironment makes an international sale, its international profile grows just a bit bigger. I wouldn't be too surprised if the Canadian Navy, said to be looking into small UAV systems to carry on its frigates, considers AeroVironment's wares in the future.
American Science & Engineering (Nasdaq: ASEI )
Finally, in news of particular interest to subscribers to our Motley Fool Rule Breakers turbo-growth newsletter, recommended stock American Science & Engineering announced the receipt of an intriguing order from the U.S. Department of Defense. AS&E has been asked to provide three SmartCheck personnel-screening systems (which are still undergoing trial runs with the Transportation Security Administration) and a Gemini parcel scanner for use at an unnamed U.S. military base abroad.
This vote of confidence from the military argues in AS&E's favor in its ongoing TSA trial runs. It also suggests to investors the value of the contract. As first revealed by CFO Ken Galaznik a little more than a year ago, AS&E has increased the gauge of "materiality," by which it measures whether a contract merits a press release. AS&E's threshold for a publicity-worthy deal begins at $2 million.
Now, considering the corollary import of the news -- increasing the likelihood that TSA will agree with DoD and decide to do a wide-scale rollout of SmartCheck -- it's certainly possible that the contract in question is actually worth less than that magic mark. But the smart money on this one suggests that these systems are selling for somewhere north of $500,000 a pop.
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