Artist's conception of the laser-armed U.S. Navy Self Defense Test Ship, nee USS Paul F. Foster (DD 964). Image source: Northrop Grumman.

Sheesh! What does it take to make the U.S. Navy happy?

Two years ago, tiny Kratos Defense & Security (NASDAQ:KTOS) strapped together six commercial welding lasers, added a bit of military-industrial complex magic, and built the Navy its first working laser cannon. Unimaginatively dubbed the Laser Weapon System, or "LaWS," the new gun proved itself capable of shooting down unmanned aerial vehicles, poking holes in small boats, and blasting targets at classified -- but "tactically significant " distances.

Kratos's LaWS finds its target. VIDEO STILL: U.S. NAVY.

But apparently that's not enough for the Navy. They want a laser that's bigger. And better. (And presumably badder.) And they want Northrop Grumman (NYSE:NOC) to build it.

Introducing LaWS's bigger, badder brother
The laser that the Navy has decided to build -- and has hired Northrop Grumman to build -- is called the Laser Weapon System Demonstrator (LWSD), and it's quite a monster.

Weighing in at 150 kilowatts in energy output, LWSD will be about four and a half times as powerful as Kratos's LaWS. According to website, that should be enough power to "take out cruise missiles, drones, and manned aircraft at ranges of a few miles." And according to Northrop Grumman energy weapons program manager Guy Renard, all this will cost "about the price of a gallon of diesel fuel per shot" -- $2 per shot.

Getting the program up and running, though, will cost a bit more.

Building LWSD
Earlier this week, we learned that the U.S. Office of Naval Research has awarded Northrop Grumman the LWSD contract. Over the course of the next three years, LWSD will progress through three phases from design to demonstration.

In phase 1, Northrop will develop a detailed design for the weapon. Northrop will receive about 58% of the $91 million in funds budgeted for LWSD's development -- $53 million -- over the first 12 months of this work. Phase 2 would greenlight Northrop to assemble LWSD and conduct land-based test of the laser. Finally, in phase 3, Northrop would conduct at-sea tests aboard the U.S. Navy's "Self Defense Test Ship," the former Navy destroyer USS Paul F. Foster (DD 964), which serves as a floating testbed for new technologies.

Start to finish, these three Phases should take 34 months to complete.

What it means to investors
It's hard to overestimate just how important this news is for the U.S. Navy -- and not just because it would catapult the U.S. into a new generation of weapons systems, unmatched by any foe on the globe. Northrop's $2-per-shot boast -- validated by earlier testing of Kratos's LaWS, which proved capable of firing multiple 33-kilowatt shots for just $0.59 each -- promises to make shipborne defense against enemy missiles, drones, and aircraft extremely cost-effective.

Moreover, a warship equipped with powerful lasers, instead of powerful -- but expensive and bulky missiles and cannon shells -- would have essentially "infinite ammo" to power its weapons. It won't need a long supply chain to keep it supplied with "bullets." So long as there's fuel in the tanks, the warship could remain in the fight. For that matter, freed of the need to lug around large munitions lockers stuffed to the gills with explosive ammunition, warships themselves could be smaller -- and cheaper.

These, as I say, are all benefits that laser weapons would confer upon the Navy -- but they're also strong arguments in favor of buying Northrop Grumman stock as well, because all these factors that make laser weapons so attractive to the Navy also make it a motivated buyer. The potential cost savings from a laser-armed fleet have already convinced the Navy to pay Northrop Grumman to develop LWSD -- and they will surely convince the Navy to buy these laser weapons once they've been perfected.

How many laser cannon might the Navy buy? According to Northrop, it's designing LWSD for easy integration onto the Arleigh Burke-class destroyer -- of which the Navy eventually intends to have 77 in its fleet. So that's at least 77 potential sales of this $91 million weapons system for Northrop. Or perhaps 154? 231? It all depends on how many lasers the Navy ultimately decides to arms its destroyers with.

Given the advantages, my guess is it's going to be a lot.

A new era is opening for the U.S. Navy. Meet Its first operational LASER WEAPON SYSTEM -- the "LAWS." IMAGE SOURCE: John F. Williams for the U.S. NAVY.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.