With the Pentagon's new, heavily hyphenated emphasis on cost-cutting and down-to-earth, boots-on-the-ground spending, one company in particular seems poised to profit: Raytheon (NYSE: RTN).
Historically known as a maker of rockets, Raytheon has been spinning out a dizzying array of new ideas of late -- everything from cut-rate eyes in the sky, to new ways of fighting frost in Canada, to helping the National Security Agency read your email (gulp?). It's putting tactical toes into the water, so to speak, and seeking out new revenue streams to wade into -- and call me a crazy optimist, but I think Raytheon's latest idea just might be a gusher. On Wednesday, Raytheon announced an admittedly small-scale contract from DARPA ($6 million and change) that could make a really big difference to the company's bottom line.
It's so crazy, it just might work
Operating under the inspired name Multilingual Automatic Document Classification, Analysis and Translation (the acronym is MADCAT), Raytheon is developing a laptop-based, on-site translation program for soldiers to use in-theater. By enabling anyone on the ground to quickly scan "foreign language text images, such as road signs, flyers, photographs, and handwritten notes, into English transcripts automatically, without the use of linguists and analysts," Raytheon promises MADCAT could save a few lives.
Now, don't go thinking this is an immediate challenge to Rosetta Stone (NYSE: RST), Nuance Communications (Nasdaq: NUAN), Google (Nasdaq: GOOG), or any of the other businesses focused on providing industrial-scale translation services to the public. Raytheon's aims are much more modest, and object-oriented. As the press release makes clear, all MADCAT aims to do right now is give soldiers a general gist of what they're seeing in a road sign. But what if said sign happens to read, say, "Danger: Radiation," "You are now entering a demilitarized zone," or heaven forfend, "Minefield"? That alone could be enough to save lives, justify the expense of the program -- and more importantly, justify expanding the program to larger military applications.
Foolish takeaway
If MADCAT threatens anyone's revenue streams, I suspect it's rival defense contractors like L-3 Communications (NYSE: LLL) and Northrop Grumman (NYSE: NOC) who should be worried. Both are heavily invested in providing expensive, human-based translation and interpretation services to the military. Both stand to lose if a low-cost, software-based solution using laptops from Raytheon saps demand for their services.
Advantage: Raytheon. This one's winning the innovation war.
