Please ensure Javascript is enabled for purposes of website accessibility

Defense News Roundup: Missiles for Kuwait, and Laser Guns for America

By Rich Smith – Mar 2, 2014 at 4:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Here's our weekly rundown of the major stories in defense spending.

The U.S. military has a reputation as a somewhat secretive organization. But in one respect at least, the Pentagon is one of the most "open" of our government agencies. Every day of the week, rain or shine, the Department of Defense tells U.S. taxpayers what contracts it's issued, to whom, and for how much -- all right out in the open on its website.

So what has the Pentagon been up to this week?

More than it had been up to before this week, that much is for sure. DoD is budgeted to spend about $6.2 billion a week on military hardware, infrastructure projects, and supplies in fiscal 2014. (A further $5.6 billion a week goes to pay the salaries and benefits of U.S. servicemen and servicewomen). Spending has been exceedingly light this year, however, with the Pentagon awarding only about $21.9 billion in contracts year to-date -- less than half the budgeted amount. Last week, though, the Pentagon finally got out its checkbook and began spending significant bank, about $5.02 billion in total.

And what did the generals get for their (read "our") money?

More green energy for us
Building on initiatives such as its $7 billion in Power Purchase Agreements awarded last summer, the Pentagon announced this past week that it was awarding five companies -- Chevron (CVX 3.06%) and SunEdison (SUNEQ) among them -- $25 million worth of awards to produce and sell renewable energy at Navy and Marine Corps installations in California and Arizona.

And more planes, too
Green energy gets all the headlines these days, but a much bigger deal for Boeing (BA -0.03%) was the Navy's decision to order 16 of the company's new P-8A Poseidon subhunting aircraft. The order will mean $2.1 billion in additional revenues to Boeing. And because the P-8A is based on a Boeing 737 chassis, the order added 16 planes to Boeing's order book for its Commercial Airplanes division as well. Incidentally, those were the only new orders that the civilian side of Boeing's plane business received last week.

While Kuwait gets all the rockets
In a deal nearly as big, defense contractor Raytheon (RTN) booked a big win Friday when the Department of Defense brokered a deal to have Raytheon supply the Kuwaiti military with two sets of PATRIOT air defense systems (called "fire units" to distinguish them from the actual missiles they fire). The contract will be worth $655 million to Raytheon, and is due for delivery in April 2018.

Patriot missile at work. Photo: Raytheon.

Opportunities on the horizon
Probably the most interesting contract announced at the Pentagon last week, though, was a smallish, $25 million award that Lockheed Martin (LMT -0.20%) won from the U.S. Army. Lockheed has been hired to "design, develop, fabricate, test, and deliver" a new type of weapons system called the High Energy Laser Mobile Demonstrator, or HEL MD.

A smaller scale version of the Laser Weapon System, or LaWS, that the U.S. Navy demonstrated last year for use in naval shipborne defense against cruise missiles and aircraft, the HEL MD is a pilot project to defend ground forces against incoming rockets, artillery and mortar rounds, and small unmanned aerial vehicles. With an entire guided missile destroyer to support it, and that destroyer's power plant to supply it, the LaWS is designed to put out a full megawatt of power. HEL MD, in contrast, will be smaller in size, and capable of being moved around by a single Heavy Expanded Mobility Tactical Truck.

Already, the Navy has demonstrated the effectiveness of its LaWS in shooting down multiple drones in exercises off the U.S. West coast in 2012 -- even at less than the desired 1MW power throughput. As technology's march toward "smaller, better, faster, stronger" continues, development of (and revenues from) new weapons systems such as the HEL MD are inevitable.

See the Navy's new Laser Weapon System at work in this video

Rich Smith has no position in any stocks mentioned. The Motley Fool recommends Chevron and owns shares of Lockheed Martin and Raytheon Company. 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.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.