Industry Week in Review – June 15, 2018
Aerospace & Defense Update
Embraer’s stock saw its largest increase in two months after its joint venture with Boeing received a major endorsement this past week. Brazilian President Michel Temer endorsed the partnership, which is essential given the government’s “golden share” in Embraer, which gives it veto power over strategic decisions around its military programs and any change in control. The commercial joint venture between Embraer and Boeing would combine their marketing, manufacturing, and engineering capabilities. Boeing would control the joint venture, but Embraer’s defense unit would remain a separate entity. Embraer provides Boeing with the necessary resources and a lower-cost manufacturing center outside the U.S. as Boeing begins plans for a new mid-range airliner.
Raytheon won a major contract with Lockheed Martin’s F-35 joint strike fighter to provide a new distributed aperture system (“DAS”), which is one of its signature capabilities. Northrop Grumman previously supplied the DAS but chose not to compete for the new contract. The DAS allows fighter pilots to see through the bottom of the aircraft onto the ground below with advanced sensory technology. Northrop decided the DAS production was no longer a successful business venture, which led to its decision to drop the project. However, Northrop will remain a part of the F-35 program through production of the APG-81 radar and sustaining the legacy DAS. Raytheon’s system was an attractive fit for the F-35 due to its affordability, as cost reductions continue to be a key focus of the F-35 program.
Government Technology Solutions
Looking to automate its mobile device management, the Defense Information Systems Agency (“DISA”) has issued a request for information (“RFI”) for an automated provisioning tool to support classified mobile access for devices used in the Department of Defense Mobility Classified Capability (“DMCC”) program. The antiquated infrastructure currently used to access the Secret Internet Protocol Router Network (“SIPRNet”) poses a substantial risk to mission readiness and creates gaps in mobile security and communication with its rigid, manual processes. The RFI outlines DISA’s search for an existing commercial tool that can automate the installation and management of user certificates for key infrastructure and set up. The new automated provisioning tool will mitigate security risks by using a virtual private network and setting device passwords. The Senate version of the 2019 National Defense Authorization Act (“NDAA”) criticized the department’s failure to have infrastructure in place with automated device management capabilities. In order to comply with the NDAA’s request, DISA intends to move quickly with this acquisition, anticipating a period of performance beginning in July 2018.
The Department of Veterans Affairs (“VA”) is seeking industry input on new technology solutions to support its operations centered around network security and efficiency. The VA’s RFI issued last Thursday seeks industry input on how blockchain ledger technology can be leveraged to bring efficiency to contract closeouts, including retroactively applying them to all pending contract closeouts. Blockchain solutions will be able to streamline the repetitive contract closeout processes and eliminate almost all labor involved in government contract close-out procedures. The second RFI, issued Tuesday, calls for a cloud-based endpoint protection system to centralize the VA’s anti-virus capabilities and protect its network of approximately 575,000 workstations and 32,000 servers. The VA calls for a solution that will be able to isolate ransomware and detect advanced threats before they infect the system, utilizing machine-learning to create an automated process.
Big Movers
Rolls Royce (up 12.8%) – Share prices were up this week after the company announced that it was “well-placed” to reach its target 1 billion pounds in free cashflow by 2020.
NIC (up 4.5%) – Share prices were up this week after the company announced a partnership with Grand Canyon National Park to offer electronic entrance passes.
Transactions
Viasat, Inc. has acquired Horsebridge Defence and Security, a provider of design, system integration, and support of deployable secure networks. Terms of the deal were not disclosed.
TGP Investments II, LLC has agreed to acquire Mid-America Precision Products, LLC, a provider of highly-engineered, precision-machined components for missiles, aerospace, and maritime products. Terms of the deal were not disclosed.
