One of the biggest threats facing the U.S. Navy today is a new anti-ship ballistic missile recently fielded by China. Officially designated the "DF-21D," American military men have another name for it: the Carrier-Killer.
Weighing in at a massive 15 tons, the two-stage, solid fuel missile is 35 feet tall and nearly five feet across. With a range rumored to extend as far as 1200 miles, the DF-21D is designed to keep American aircraft carriers at a safe distance (from Taiwan) in the event hostilities ever break out, and to deny access to seas within striking distance of the Chinese mainland.
But in the ever changing arms race of tit meets tat, on Tuesday, Raytheon (NYSE:RTN) turned the tables on China and announced test results that could (we hope) make the DF-21D irrelevant. Raytheon's solution is the RIM-162 ESSM "Evolved SeaSparrow," an improvement on the basic SeaSparrow air defense missile developed by Raytheon and General Dynamics (NYSE:GD). Its mission is to shoot down high-diving, supersonic missiles like the DF-21D.
"That's a hit!"
On Tuesday, Raytheon confirmed that in a weapons test at sea, the Evolved SeaSparrow successfully made "skin-to-skin" contact with a DF-21D surrogate, proving its ability to shoot down kill the Carrier Killer.
The company's next move will be to step up marketing of the air-defense missile to the U.S. Navy, and to our allies abroad -- and Raytheon's wasting no time in doing so. In the same announcement in which it explained the intercept results yesterday, Raytheon's vice president for missile systems' naval and area mission defense, Rick Nelson, called the Evolved SeaSparrow "truly an international missile."
Whether Taiwan, Japan, South Korea, and other U.S. allies in the region will take the hint remains to be seen. But when you consider that the missiles cost less than $1 million apiece -- yet are capable of protecting vital naval warships worth upwards of $1 billion (and anywhere as high as $13 billion for a Ford-class nuclear aircraft carrier), you have to assume a lot of countries are going to consider this product a very economical form of "insurance" against DF-21D "risk."
Already, Raytheon has sold more than 2,000 Evolved SeaSparrows. I think that after this week's test results, Raytheon's going to sell a heckuvalot more, with very beneficial results for its revenue stream, its bottom line, and its investors.