The defense and security industries started off this week with a bang yesterday, as everybody who was anybody, it seemed, had something new to report. Let's round up the headlines, taking it from the top:
Unisys (NYSE:UIS)
The FBI is looking into allegations that computer consultant Unisys dropped the ball on certain IT contracts it worked for Homeland Security and the Transportation Security Administration. According to The Wall Street Journal, Unisys may have failed to install security measures adequate to protect the two agencies' computers from unauthorized entry, with the result that foreign-based hackers were able to access these computers over a period of some months. Unisys denies the charges. Natch.
General Dynamics (NYSE:GD)
What's bad news for Unisys, though, may have been good news for General Dynamics. On Monday, the General announced that it has received a task order from DHS to protect the Coast Guard's computers from similar hacking. General D will monitor the Coast Guard's computers around the clock for as long as the next 52 months, for a fee that may reach $10.5 million over the course of the contract. Granted, that's peanuts for a firm with more than $25 billion in annual revenue, but every little bit helps.
Northrop Grumman (NYSE:NOC)
A somewhat larger award went Northrop's way, as the firm won a contract from the Naval Surface Warfare Center to provide "at least" 940 laser rangefinder designators (these are the glorified laser pointers that "light up" targets to be hit by laser-guided bombs) to the Navy's special ops units. The contract's value is almost $100 million over the course of five years, but with Northrop pulling in approximately $30 billion last year, this contract, too, qualifies as peanuts.
American Science and Engineering
(NASDAQ:ASEI)
Speaking of legumes, we'd be remiss in failing to mention the news out of Foolish Motley Fool Rule Breakers recommendation AS&E. The news that a customer ordered $2.3 million worth of maintenance services seems as puny as it is vague (who's the customer again, and what's being serviced?). But, amounting as it does to more than 1% of annual revenue, this order is a relatively bigger deal for AS&E than the bigger contracts are for the bigger players. The news also serves to remind us of the $2 million "materiality" threshold AS&E uses as a cutoff for issuing press releases.
To learn why the firm consistently reports greater revenue than the sum of its press releases, check out our recent interview with CFO Ken Galaznik. (Note: If you're not yet a subscriber, pick up a free 30-day trial here and you can read the interview anyway.)
SAIC (NYSE:SAI)
Leaping exponentially up the dollar scale, we turn next to SAIC's IDIQ ("indefinite-delivery/indefinite-quantity") contract from the Space and Naval Warfare (SPAWAR) Systems Center. Stretching over as much as a decade, this contract to provide "tactical command and control integration services" to SPAWAR's Systems Center in Charleston, S.C., could net the Motley Fool Inside Value recommendation as much as $459 million over the course of the next decade. Plus, SAIC gets to say it works for an agency called "SPAWAR" -- how cool is that?
L-3 Communications (NYSE:LLL)
But Monday's most attractive story (although it probably doesn't sound like it at first glance) comes out of L-3 Communications. At first glance, the announcement of a "successful flight test of a video relay from a Common Data Link (CDL) compliant, software-programmable terminal weighing one pound" seems designed to elicit a yawn from all but the geekiest of electronic engineers. That's all the more likely when you note that, unlike the day's other announcements, this one contains no actual dollar signs.
I'd urge you to keep a close eye on this, however, because it just might be the most significant news released on Monday. You see, L-3's "mini-CDL terminal" was tested not on a full-size airplane, but on a "U.S. Navy unmanned air system" -- a UAV. With every passing day, I become more convinced that the future of the U.S. military will revolve around robots on the ground, and UAVs in the air. L-3 is staking out a leading position in the communications gear necessary to keep the unmanned air force of the future in contact with its counterparts on the ground. That's farsighted, and perhaps far more important than the dollar-dominated news that L-3's rivals reported yesterday.
For more on UAVs and how they can help defend your portfolio, read:
