Some military drones fire missiles. AeroVironment's Switchblade drone is the missile.

In its short life as a publicly traded company (not even 10 years young), AeroVironment (NASDAQ:AVAV) has produced and sold in excess of 25,000 drones to military and other customers. More than 1,500 of those drones are Switchblades.

While best known for its Raven and Puma remotely operated, unmanned aerial vehicles, AeroVironment has also enjoyed a great deal of success with Switchblade, a specific drone subset that it dubs a "tactical missile system." A sort of "kamikaze" drone, Switchblade merges the functions of target-seeking UAV and target-killing missile. Launched by an infantry squad, Switchblade can be operated remotely and will wirelessly relay video to its controller as it seeks a target. Finding that target, Switchblade can be guided in to strike it, detonating a small explosive charge on impact.

Of course, there is one hitch to this setup: Switchblade is essentially a flying bomb. And when you're flying bombs around, you really don't want to lose control of them. That's why last month, AeroVironment announced that it's upgrading the security of the digital data link that connects a Switchblade to its remote controller.

AeroVironment says the move, which will result in a new "Block 10C" Switchblade, "significantly reduces the likelihood of signal interception." (A corollary to that is that it also reduces the likelihood of a Switchblade being electronically hijacked, and turned against its controller.) Additional enhancements include extending the range at which Switchblade can be controlled and isolating the control signal so "multiple Switchblade systems" can be used within one single area of operation without their signals conflicting. And on the pointy end, AeroVironment is having its munitions partner, Orbital ATK (NYSE:OA), produce an advanced warhead for the weapon.

What it means to investors

Add up all of those improvements, and what do they mean? Switchblade has become more reliable to operate, more effective in terms of both range and lethality, and -- this could be important -- easier to use in greater numbers. In other words, the Block 10C upgrade makes Switchblade's market opportunity bigger. 

How big? Well, AeroVironment holds pricing information on all of its drones pretty close to the vest. That said, we can make at least an educated guess on Switchblade's value to AeroVironment. (To Orbital ATK, Switchblade remains only a footnote. No matter how big the program becomes, it's not likely to significantly affect the fortunes of Orbital ATK, which does more than $3.8 billion in business a year.)

AeroVironment, though, says it "has produced more than 1,500 Switchblade missile bodies for various customers." We also know that over the course of just two very lucrative weeks in August and September 2013, the U.S. Army placed three orders for a total $51.4 million worth of Switchblades. Media reports also mention other purchases of Switchblades -- $4.9 million bought through one contract in 2011, $5.1 million more bought in 2012, and a further $44 million worth of Switchblades bought in fiscal year 2014.

Add up all the of contracts we know about, and AeroVironment has received at least $105.4 million worth of orders for 1,500 Switchblades produced -- which works out to a unit cost of more than $70,200 per Switchblade. Minimum.

Putting that number in context, $105.4 million is about 40% of the revenues AeroVironment collects in a year -- not bad for a product that's only been on the market for about five years. And now Switchblade has just become an even more useful tool in the U.S. Army's toolbox. That can only mean good things for AeroVironment stock.

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.