Northrop Grumman (NYSE:NOC) is going to Taiwan.
Wednesday after close of trading, Northrop issued a press release disclosing that it has won a competition to build the new radar system that will be incorporated into new and upgraded versions of Lockheed Martin's (NYSE:LMT) venerable F-16 fighter jet.
The radar system in question, Northrop Grumman's Scalable Agile Beam Radar, or SABR, "will provide F-16s unprecedented operational capability, greater reliability and viability in threat environments beyond 2025," said Joseph Ensor, vice president and general manager of Northrop Grumman's ISR and Targeting Systems Division.
Not everyone prefers Northrop's system. In fact, South Korea recently chose a Raytheon (NYSE:RTN) radar system to go into F-16s that it is upgrading, preferring it over the Northrop offering.
Regardless, SABR will be incorporated into both the newest version of the F-16 used by the U.S. Air Force, the F-16V. It will also go into Taiwan's fleet of 146 F-16 A/B fighter jets, which the Obama Administration has agreed to upgrade as an alternative to selling the Taiwanese new, more advanced versions of the F-16 that they had wanted to buy.
What does it mean to you?
Despite announcing the SABR contract, neither Lockheed nor Northrop disclosed how much the contract will be worth to Northrop. It is likely, however, to be sizable. The total value of the Taiwan upgrades contract, for example, is said to approximate $4.2 billion -- although that money will be split among general contractor Lockheed, Northrop, and other companies vying for a piece of the action, which include Raytheon (still bidding on the electronic warfare package), Exelis (NYSE:ITT) (bidding against Raytheon), and possibly United Technologies (NYSE:UTX) as well, which would like to give the planes new engines.
In Northrop's case, the win could be even more significant, given that upgrades to just the air force of the tiny nation of Taiwan alone will involve more than 12 dozen planes -- and that there are about 4,500 F-16s of various configurations in service around the globe today, all potentially upgradable. Northrop shares that rose 0.8% in Wednesday trading, could get an even bigger boost tomorrow, once investors get a chance to trade on this latest news.
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Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool owns shares of Lockheed Martin, Northrop Grumman, and Raytheon. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.