April 30, 2012 § Leave a comment
More female executives are rising to the top levels of the largest defense companies, setting a standard that industry officials say may help encourage more women to enter the field.
This week, Phebe N. Novakovic is set to become president and chief operating officer at Falls Church-based General Dynamics after serving as executive vice president of the company’s marine systems group.
The move puts Novakovic in line to replace Jay L. Johnson, General Dynamics’s chairman and chief executive, though the company has not made any formal decision.
“That’s the start of a very disciplined succession rhythm here,” Johnson said of Novakovic’s new role during a call with investors last week. “We’ll continue to work very closely together.”
Novakovic’s ascension comes as Bethesda-based Lockheed Martin, the world’s largest defense contractor, named Marillyn A. Hewson its new president and chief operating officer, beginning Jan. 1. Hewson heads the company’s electronic systems business.
Linda Hudson, president and chief executive of BAE Systems’ Arlington-based U.S. business, said the rise of female executives could influence young women interested in aerospace and defense, potentially broadening the hiring pool.
“With Marillyn’s promotion at Lockheed Martin following on the heels of Phebe’s promotion at GD, I think it’s harder and harder to say these are just individual events,” Hudson said. “Trend might be too strong a word, but [we have] certainly a pattern of women moving up at aerospace and defense companies.”
The arrival of female executives at some of the most prominent contractors may also influence smaller companies, said Marion Blakey, president and chief executive of the Aerospace Industries Association.
“Is it a tidal wave? No, but it is a surge,” Blakey said. “I really do feel these [promotions] are an important bellwether for tapping the best talent in our industry.”
Hewson, who has spent 29 years at Lockheed, downplayed the role gender played in her success. She has worked in three of the company’s four business units, held 18 different leadership roles and moved to eight different Lockheed locations.
In 2007, Hewson helped establish a new business for Lockheed called Logistics Services, and she was head of Lockheed Martin’s business in Owego, N.Y., when the unit’s flagship program, the presidential helicopter, was canceled in 2009.
“I know that a lot of women look for role models in different areas so I certainly want to continue to be a role model,” she said in an interview. “But I don’t think it’s necessarily about being a female in our business. I think it’s about . . . my track record, my results.”
Despite the recent promotions, Jolynn Shoemaker, director of the Center for Strategic and International Studies’ women in international security program, said the industry still fails to retain enough of its female employees.
“We still do have a problem with a leaky pipeline,” Shoemaker said. The thinking used to be “if we could get enough women entering into these sectors, our problems would just gradually go away . . . but we’re seeing that it is actually much more complicated than that.”
By Marjorie Censer
April 29, 2012
April 27, 2012 § Leave a comment
System Provides Greater Endurance, Range and Payload Capacity
The U.S. Navy has selected Northrop Grumman to produce the next-generation Fire Scout unmanned helicopter using the Bell 407 airframe. The new variant provides greater range, endurance and payload capacity to ship commander’s intelligence-gathering efforts.
According to a U.S. Department of Defense news release on contract awards released April 23, the company will produce a total of eight Fire Scouts within an amount not to exceed $262 million. The Navy plans to purchase a total of 28 aircraft under a rapid development effort.
The Fire Scout endurance upgrade has been designated as the MQ-8C.
“Through our company-funded Fire-X demonstration effort we proved that using the mature unmanned systems architecture developed for the MQ-8B Fire Scout paired with the Bell 407 helicopter would provide greater capability efficiently and affordably,” said Duke Dufresne, vice president and general manager for unmanned systems. “By using systems that have many years of development already invested in them we can meet the Navy’s needs quickly.”
Northrop Grumman is the prime contractor for the MQ-8C program. Major suppliers for new variant include Bell Helicopter and Rolls Royce.
Final assembly of the new Fire Scout variant will be completed at Northrop Grumman’s Unmanned Systems Center in Moss Point, Miss.
April 25, 2012
April 27, 2012 § Leave a comment
About five years ago, the Coronado-based Naval Special Warfare Command was having a tough time recruiting men to become Navy SEALs.
To capture that key 18- to 24-year-old male market, production company Bandito Brothers was hired to use flashy cinematography to document Navy SEAL training.
Impressed by the action shots, Bandito Brothers turned the footage and concept into a screenplay.
“Act of Valor,” which took five years to produce, hit theaters in February and helped popularize the SEALs. That Hollywood buzz, paired with a down economy and a high unemployment rate, caused more men to sign up.
The command includes 9,000 active duty, civilians and subject matter experts. Some 2,000 are enlisted Navy SEALs, 550 are Naval SEAL officers and 750 are combatant-craft crewmen.
“For every kid who steps in the door, five get turned away,” said Rear Adm. Garry Bonelli, deputy commander for Naval Special Warfare Command, who spoke at the University Club’s monthly military happy hour on Monday.
A post-9/11 world has dramatically changed the size and scope of the force.
“We’ve doubled in size and tripled in budget,” he said. “The hard part is we’ve quadrupled in missions.”
Navy SEALs are gone 255 days out of the year, out in the fight or training.
“We are not putting heads in beds at home with their wives and families,” he said. “That’s probably one of the biggest dynamics that’s changed.”
When Bonelli enlisted in the Navy in 1968, he was surrounded by other single guys. Today however, half are married, and of that half, most have children. The government is reacting to that paradigm shift, he said.
“The DoD is finally putting money where their mouth is and trying to help families, too,” he said. “With resilient warrior families, I can get resilient warriors.”
Surprisingly, the types of warriors that make great SEALs aren’t usually Division 1 football players or wrestlers, he said (though some SEALs are former gold and silver Olympians).
“They are more like Rudy,” he said, referring to Daniel “Rudy” Ruettiger in the film that depicts the life of a young man who dreamed of playing college football despite significant obstacles. “The guy who gets knocked down and gets back up and contributes to the team.”
That team ability means being able to both lead and follow.
“The biggest bad asses I know are the most humble people in the world,” Bonelli said. “You’d never know.”
The strenuous psychological and physical process knocks down plenty of applicants, revealing those desirable Rudy gems early on. Lots of attrition occurs during the infamous “hell week,” when trainees are kept awake for long periods of time.
Out of the 5,000 applicants a year, 1,000 are accepted into the program.
“Out of that we are lucky to graduate 250,” he said. “We’ve spent a lot of your tax dollars figuring out who can become a Navy SEAL.”
The selection and training process takes a lengthy two and a half years before a SEAL can be placed overseas.
“Our Achilles heel right now is diversity. Most of the guys look like Southern Californian surfers,” he said. “Most of them are white, well-tanned and good looking guys.”
And that’s whether they come from Oshkosh, Wisc., New York City or Southern California, he said.
“What I need is diversity. When I am putting people in the world, I need people of color, people who have diverse backgrounds,” he said.
The ideal diverse candidate has lived somewhere other than the United States and can speak second and third languages, like French or Spanish. Today, knowing Middle Eastern languages is especially helpful when being stationed overseas.
“They are difficult to recruit and we are having a heck of a time doing that,” he said.
The U.S. Naval Academy is doing a good job of diversifying its student body, Bonelli said. Many of its graduates breeze through the SEAL’s strenuous training program and become officers.
“People can identify with those young leaders,” he said. “That is how we hope to diversify the force, but it’s a long-term investment.”
A SEAL’s talents don’t just include putting bullets on a target; being a diplomat and problem-solver is also essential in order to help foreign nations fight their own fight and secure their own country.
The preponderance of Bonelli’s Navy SEAL force is in Afghanistan, but they are also in about two dozen other countries at the moment.
They’re at some locations because they’ve been invited; other places absolutely don’t want them there but they are there anyways, he noted.
“Some places we are there and they don’t know we are there, and other places they think we are there but we’ve never been there,” he said.
By Tierney Plumb
Wednesday, April 25, 2012
CNSNews l Chinese Hackers Stole Plans for America's New Joint Strike Fighter Plane, Says Investigations Subcommittee Chair
April 26, 2012 § 9 Comments
Intruders from China hacked into computers and stole the blueprints for America’s new joint strike fighter planes, the F-35 and F-22, according to the chairman of the House Homeland Security Subcommittee on Oversight, Investigations and Management.
Rep. Michael McCaul (R-Texas) made the statement during a Tuesday hearing on cyber security.
“I’ve been dealing with this issue for a long time,” McCaul said. “But I think it’s important that the American people, who most of them don’t understand this issue, have a better idea of what–what is at risk. You know when I look at the theft of intellectual property to the tune of $1 trillion, that’s a serious economic issue for the United States.
“When I look at countries like China, who have stolen our Joint Strike Fighters, F-35 and F-22’s, stolen those blueprints so they can manufacture those planes and then guard against those planes,” he said.
China has created citizen hacker groups engaged in cyber espionage, established cyber war military units and laced the U.S. infrastructure with logic bombs, he said.
It is not the only government to do so, he added.
“(M)ake no mistake, America’ is under attack by digital bombs,” McCaul said. “There are several things the American public should understand about these attacks. They are real, stealth and persistent and can devastate our nation.
“They occur at the speed of light. They are global and could come from anywhere on the earth. They penetrate traditional defenses,” he continued.
“So who is conducting these attacks and why? An October of 2011 report to Congress on foreign economic collection and industrial espionage states it is part of China and Russia’s national policy to identify and steal sensitive technology, which they need for their development,” McCaul said.
McCaul said Russia has been almost as active as China in trying to steal U.S. defense secrets.
“When you look at China and Russia who have hacked into every federal agency in the federal government including the Pentagon,” McCaul said. “You know we talk about the analogy agents of a foreign power call it paper files walking out with classified or non-classified information, it would be all over the papers. But yet in the virtual world, that’s happening. And no one seems to know or really pay attention to it. And then the final piece, you know there’s the espionage, the stealing of military secrets, satellite technology, rocket technology out of NASA, it’s prevalent. It’s everywhere.”
The Texas Republican, a former federal prosecutor, re-iterated his comments Wednesday on C-SPAN’s “Washington Journal” program.
Larry Wortzel, a member of the United States-China Economic and Security Review Commission, told the House Foreign Affairs Committee at a March 28, hearing that a report released by the commission last month had concluded that the People’s Liberation Army of China has made cyber attacks a “cornerstone” of its operations.
“At the same time, the report concludes, during peacetime, computer network exploitation has likely become a cornerstone of PLA and civilian intelligence collection operations supporting national military and civilian strategic goals,” Wortzel said.
“The Commission report tells us that China’s computer network exploitation activities to support espionage opened rich veins of information that was previously inaccessible or could only be mined in small amounts with controlled human intelligence operations,” Wortzel said.
The commission’s 2009 Annual Report to Congress, citing a Wall Street Journal article, discussed “intruders, probably operating from China, that exfiltrated ‘several terabytes of data related to design and electronics systems’ of the F-35 Lightning II,” one of the most advanced fighter planes under development.
In addition, the report noted, Lockheed Martin Corporation, Northrop Grumman Corporation, and British Aerospace and Engineering reportedly all have experienced penetrations from hackers based in China in the past three years.
By Christopher Goins and Pete Winn
April 25, 2012
April 26, 2012 § Leave a comment
The U.S. Naval Air Station in Jacksonville, Fla., has received the second set of P-8A Poseidon training devices from Boeing.
The set includes an operational flight trainer, a weapons tactics trainer and four electronic classrooms.
Boeing will deliver seven more OFTs and four more WTTs and two part-task trainers — plus more than two dozen classrooms and attendant courseware — to the Navy facility by the end of next year.
“The P-8A Weapons Tactics Trainer is a new innovation for Boeing,” said Mark McGraw, Boeing vice president for Training Systems and Government Services. “Unlike previously delivered tactics trainers, it can be used to train multiple mission operators at the same time.”
The P-8A is based on Boeing’s commercial 737 aircraft. The Navy is buying 117 of the planes to replace its aging P-3 fleet. Boeing officially delivered the first of 13 low-rate initial production P-8A Poseidons to the Navy in early March.
Boeing said its weapons tactics trainer has five mission-crew workstations and five instructor-operator stations to train mission crew on the aircraft’s maritime sensor and communications systems and to control and deployment of its weapons.
The full-motion, full-visual OFT is derived from the commercial 737 full-flight simulator.
April 25, 2012
April 25, 2012 § Leave a comment
Traditionally, stocks of defense industry companies (and other firms that are heavily reliant on the government for their business) are good places for investors to seek safety and play, well, defense.
When economic fears are high, investors often turn to such stocks, knowing that they have more reliable revenue streams–i.e., Uncle Sam–than other companies.
That is, unless the economic fears involve soaring federal deficits and a seemingly inept Congress, as they do now. By failing to come up with a plan to slash the nation’s deficit last year, Congressional leaders left the budget at the mercy of automatic, dramatic cuts that will go into effect in 2013 if no compromise is reached–and the cuts are to be split 50/50 between defense spending and other domestic spending.
With that threat looming, defense stocks are now being viewed as anything but defensive. Many are trading at very low valuations, with investors expecting their earnings to shrink, perhaps dramatically.
To be sure, defense companies and other firms that get their business from Uncle Sam are indeed facing a profit pinch. But keep two things in mind: First, the threat to profits for these companies is known; and second, investors have a penchant for overreacting to negative news. Because of that, some pretty bad scenarios have already been baked in to aerospace and defense firms’ numbers, as well as those of other firms that get a lot of their business from the government.
Many of these stocks are trading at extremely low valuations. Investors are expecting little from them, which means that they don’t need to perform great for their stocks to make solid gains; for many, they just need to do “not that bad.”
Because of their attractive valuations, a number of these types of stocks have been popping up on the radars of my Guru Strategies, each of which is based on the approach of a different investing great. Here are a handful that investors seem to have gotten too dour on.
Harris Corp. (HRS): Florida-based Harris provides communications technology, products, and networks for government and commercial markets. Its products range from wideband-networking tactical radio systems for defense and security forces to secure telecommunications networks for air traffic control, and the firm is active in more than 150 countries.
Harris ($5 billion market cap) gets strong interest from my Peter Lynch-inspired model. Its 16.7% earnings per share growth rate (I use an average of the three-, four-, and five-year EPS figures to determine a long-term rate) and multi-billion-dollar sales ($6.0 billion over the past year) make it a “stalwart” according to the Lynch approach–the kind of large, steady firm that Lynch found offered protection during downturns or recessions.
To find stocks selling on the cheap, Lynch famously used the P/E/Growth ratio, adjusting the “growth” portion of the equation to include yield for stalwarts, since they often pay solid dividends; yield-adjusted P/E/Gs below 1.0 are acceptable to my Lynch-based model, with those below 0.5 the best case. Harris’ 10.2 P/E ratio, 16.7% growth rate, and 3% yield make for a very solid 0.52 yield-adjusted P/E/G, a great sign.
ManTech International (MANT): Based in Fairfax, Va., ManTech is one of the U.S. government’s leading providers of technologies and solutions for mission-critical national security programs. It serves numerous federal agencies, including the intelligence community, the Departments of Defense, State, Homeland Security and Justice, and the space community. Its products and services range from systems engineering and integration to software development services and cyber security to critical infrastructure protection and information warfare support.
ManTech gets high marks from the model I base on the writings of hedge fund guru Joel Greenblatt. Greenblatt’s approach is a remarkably simple one that looks at just two variables: earnings yield and return on capital. My Greenblatt-inspired model likes ManTech’s 18.2% earnings yield and 58.9% ROC, which combine to make the stock the 16th-best in the entire U.S. market right now, according to this approach.
Northrop Grumman (NOC): One of the country’s largest defense contractors, this Virginia-based firm’s products include unmanned aircraft systems, B-2 stealth bombers, the James Webb space telescope, radar systems, 911 public safety systems, and cyber security solutions, to name just a few. The $16-billion-market-cap firm is a good example of a defense company with low expectations–it trades for just 8.3 times projected 2012 earnings, and that’s assuming an 11.3% decline in earnings. (Looked at another way, at its current price, earnings would have to fall more than 40% next year for the stock’s P/E to hit 15–a still-reasonable multiple.)
Grumman gets strong interest from three of my strategies. My Lynch-based model likes Grumman’s solid 18.6% long-term EPS growth rate and its low 0.38 yield-adjusted P/E/G. My Kenneth Fisher-inspired model, meanwhile, likes that it trades for just 0.59 times sales, and that it is generating $3.85 in free cash per share. Finally, my Greenblatt-based model likes the stock because of its 19.8% earnings yield and 48.6% return on capital.
Rockwell Collins (COL): This Iowa-based firm makes communication and aviation electronics, specializing in flight deck avionics, cabin electronics, mission communications, information management, and simulation and training. It has an $8.1 billion market cap.
Collins gets high marks from my Warren Buffett-inspired strategy. My Buffett-based model looks for firms with lengthy histories of earnings growth, manageable debt, and high returns on equity (which is a sign of the “durable competitive advantage” Buffett is known to seek). Collins delivers on all fronts. Its EPS have increased in all but two years of the past decade; it could pay off its $774 million in debt in less than two years, if it wanted to, given its $589 million in annual earnings; and its 10-year average ROE is an impressive 36.3%. Its shares also have a 7.2% earnings yield, which more than triples the yield on a 10-year Treasury bond, another reason this model likes the stock.
CACI International (CACI): Based in Arlington, Va., CACI provides IT and professional services in the defense, intelligence, homeland security, and IT modernization and government transformation arenas. The $1.6-billion-market-cap firm has taken in more than $3.7 billion in sales in the past year, and has more than 120 offices across North America and Western Europe.
CACI gets strong interest from my Martin Zweig-, Joel Greenblatt-, and James O’Shaughnessy-based models. My Zweig-inspired strategy likes CACI’s long-term EPS growth (16.7%), and the fact that growth has increased recently (39.8% in the most recent quarter vs. the year-ago quarter). It also likes that earnings growth has been driven by revenue growth (15.2% over the long term) rather than cost-cutting or other unsustainable measures. While Zweig was a growth investor, he also wasn’t willing to pay too high a price for a stock. With CACI, that’s not an issue: Shares trade for just 11.1 times earnings, well below the market average.
My Greenblatt model, meanwhile, likes CACI’s 14.1% earnings yield and 64.6% return on capital. And my O’Shaughnessy-based growth model likes that it has upped EPS in each year of the past half-decade. It also likes the firm’s combination of a solid 66 relative strength and low 0.43 price/sales ratio.
By John Reese
April 24th, 2012
April 24, 2012 § Leave a comment
The U.S. Department of Defense and engine-maker Rolls-Royce have signed a contract for 268 engines to power V-22 Osprey aircraft.
The AE 1107C engines for U.S. Marine Corps and U.S. Air Force Ospreys are worth $598 million.
“Rolls-Royce continues to be the world leader in tilt-rotor engines and this long-term contract reflects the confidence our customer has in our expertise and our technology,” said Patricia O’Connell, Rolls-Royce president of Customer Business — North America.
“Throughout the length of this contract, we will strive to further improve performance and capability of this unique aircraft.”
The contract is for one base year of performance with four option years. In the first year, Rolls-Royce will deliver 70 engines valued at $151 million.
Rolls-Royce is the sole manufacturer of the engines for the V-22, allowing it to take off and land like a helicopter and fly like a fixed-wing aircraft. To date, it has delivered 550 AE 1107C engines to the Defense Department.