"As the U.S. Defense Department shifts its spending priorities away from big-ticket weapons systems ... contractors are scrambling to find new avenues of growth. With millions of cyber-attacks launched each day against governments and corporations, cyber-defense looks to be an opportunity that will expand for years to come."
 -- Joseph C. Anselmo, Aviation Week 

"[Cybersecurity] will be one of the few growth opportunities the defense market is looking at during the Obama years."
-- Loren Thomspon, Lexington Institute.

Cybersecurity -- it's all the rage in defense circles. Threatened with wide-ranging spending cuts on traditional "big metal" defense programs, L-3 Communications (NYSE: LLL) and SAIC (NYSE: SAI) have set up special cybersecurity units to compete with giants like Lockheed Martin (NYSE: LMT) and Boeing (NYSE: BA), who have both targeted the growing field. Raytheon (NYSE: RTN) invested close to a quarter of a billion dollars beefing up its cybersecurity business over just the last three years.

But while these efforts may replenish revenue streams for the defense giants, they fail at one critical task: Offering small investors a pure-play investment in this high-growth defense industry. Enter Keyw Corporation, with a possible solution. 

IPO dreams
 In a filing with the SEC last week, Keyw announced a potential $100 million IPO, to occur on a date yet unknown. According to its S-1 filing, Keyw has expertise in collecting and analyzing intelligence data for "cybersecurity, cyber superiority, and intelligence" tasks. 

The NSA provided approximately 41% of Keyw's pro forma revenues last year. The Air Force chipped in another 41%, with the balance coming from "other intelligence, defense, homeland security and law enforcement organizations." It appears that Keyw does good work, since 95% of the time it wins a contract with an option for renewal, customer re-up. But that doesn't mean you should, too. 

You see, Keyw aims to use much of its IPO winnings to retire $34 million in debt that it's run up over the course of a multiyear acquisition spree. Of course, Keyw wouldn't need to conduct an IPO if it could generate cash on its own -- but that's just the problem. The company burned through $8.5 million in free cash flow last year, and another $4.3 million in the most recent quarter alone (Q1 2010). 

Foolish final thought
 Whenever a private company goes public, the key question to ask is: "Why?" Why didn't someone else buy it? (Boeing, Lockheed, and the rest are certainly interested in cybersecurity.) Why am I now offered a chance to own this? 

Here, I fear the answer is: Because it's just not a great business. I'd throw away this IPO -- lock, Keyw, and all.