"There are those that see JSF as the last manned fighter. I'm one that's inclined to believe that."
-- Adm. Michael Mullen, chairman of the U.S. Joint Chiefs of Staff.
Think unmanned aerial vehicles (UAVs) are a First World phenomenon? Think again. When the calendar rolled over into 2000, the whole world entered the 21st century. A lot of countries you may not ordinarily think of as "first-rate powers" are starting to act a lot like they are.
In this, our latest installment of H.W.F.T.T., we're going to run down the list of these soon-to-be-ready-for-prime-time players, bring you up to speed on global developments, and tie it all up with a bow, and an investing takeaway. So strap on your seat belts and return your trays to an upright position, as we depart for ...
Poland!
Our first entry in the "soon-to-be-ready" segment is Poland. Late this summer, scientists at the Polish Mobile Systems Research Laboratories and Institute of Computing Science announced progress on a homegrown UAV dubbed the "Rarog" (no, I am not making that up). Boasting a presumed 18-foot wingspan, the Rarog would be the largest of three UAVs the Poles hope to field. This puts the Rarog somewhere between Boeing's (NYSE:BA) ScanEagle and Textron's (NYSE:TXT) Shadow on the size map when comparing take-off weights.
Still on the drawing board, this hypothetical Rarog won't be crowding runways anytime soon. In the meantime, the Poles have also announced they're considering buying drones from Israel, for use by their 2,000 troops currently operating in Afghanistan as part of the NATO contingent.
Welcome to the club -- now take a number and have a seat
OK. Poland's a NATO member and arguably a modern "European" nation-state, so perhaps its interest in UAVs is to be expected. But I guarantee that a few of the other names on this list will surprise you:
- Thailand: We recently learned that Thailand intends to purchase several small UAVs to secure its own entree into the field. After playing with a few foreign-bought model airplanes, the Thais plan to begin building indigenous planes.
- Pakistan: The Pakistanis are going another route, partnering with Selex Galileo to build a large unarmed UAV called the "Falco."
- Indonesia plans to purchase Puna UAVs from India as early as next year.
- U.S. commanders have expressed interest in equipping Afghanistan with drones for its own military.
- Elsewhere, an unnamed "African state" reportedly purchased a pair of Israeli-built Falcon Eyes in recent weeks.
Now I don't want to leave the impression that there's some arms race between America and the Third World. Fact is, a lot of well-developed Western nations are also getting into the UAV race. Over in Europe, for example ...
NATO*
September saw NATO ink a memorandum of understanding with Northrop Grumman (NYSE:NOC) to begin purchases of the Global Hawk. The "Alliance Ground Surveillance" project could result in as many as eight Global Hawk sales, and cost up to $2.2 billion for the Global Hawks, related ground control, and other support contracts. (A pretty penny for a robot plane that lists for closer to $35 million apiece.) Partner companies including Raytheon (NYSE:RTN) will also benefit.
More recently, small-UAV specialist and Motley Fool Rule Breakers recommendation AeroVironment (NASDAQ:AVAV) made a successful touchdown in Holland. The Dutch Military Aviation Authority issued AeroVironment a "Micro-Unmanned Aerial Vehicle" certificate permitting operation of AeroVironment-made Raven UAVs within Dutch Air Space. That accomplished, we'll be looking for sales to follow.
Just next door, France has bought six SDTI Sperver UAVs from Canada, is still negotiating buying more UAVs from EADS, and is considering buying Predator Bs from America's very own General Atomics.
And speaking of General Atomics: Across the Channel from France and Benelux, competition is heating up for General Atomics' vaunted (and armed) Reaper UAV. In a joint venture, French aviation leader Thales, and Israel's Elbit Systems (which has teamed up with General Dynamics (NYSE:GD) to build UAVs in the U.S.) are rumored to be arming the British Watchkeeper UAV with missiles, a la the Predator and Reaper.
* Honorable mention in this category goes to Australia, which is leasing drones from Israeli Aircraft Industries (like Poland, for use by its forces in Afghanistan).
What does all this mean to investors?
Skeptics may argue that anytime a foreign nation builds its own UAV system -- or buys one from a third party that isn't the U.S. -- it's a sale lost by U.S. defense contractors. Me, I look at things differently.
To my mind, increasing numbers of UAVs mean there's just one more skeet target for Boeing's Laser Avenger anti-UAV laser gun. That, or it's providing a chance for aerial target practice by a Lockheed Martin (NYSE:LMT) F-16.
Or even in the very worst case, the widespread adoption of UAV technology around the globe will only serve to validate the technology, and set off a new arms race (albeit, most of these birds still aren't "armed") among the U.S., its allies, and, well, the guys in black hats. All of which would be good news for Pentagon contractors.
My advice: Invest in this trend today. Move too slow, and it may fly away from you.
That's all for now. Until next time, happy flying, and Fool on!
