Industry Week in Review – June 6, 2014
Aerospace & Defense Update
Bombardier suspended flight tests of its CSeries aircraft after a Pratt & Whitney PW1500G engine suffered an unspecified failure during ground runs at the Mirabel, Quebec site last week. This recent failure adds unwelcome pressure to the already delayed CSeries flight-test-effort. This week, reports announced Bombardier’s CSeries planes could resume flight testing in a few weeks after the plane’s engine manufacturer believes it has found the cause of the incident that grounded the four test aircraft. Pratt & Whitney officials said a preliminary analysis of the engine confirms the minor incident was not related to the engine’s design, and that all problems can be fixed rapidly as not to affect testing schedules. Bombardier will disclose details about the incident and a time frame for a return to flight testing as soon as possible. In the meantime, ground tests will continue as Bombardier attempts to keep the CSeries on track for service in 2015.
Despite President Obama’s announcement last week that the Pentagon would leave only 9,800 American troops in Afghanistan in 2015, experts stated this week they still expect the Pentagon to request between $50 billion to $70 billion in Overseas Contingency Operations (“OCO”) funding. This range is in the middle of the $79.4 billion placeholder submitted to Congress in March, and the Pentagon’s estimate of $20 billion to support remaining troops in Afghanistan annually. Experts say the estimate indicates the Pentagon will continue using OCO funding to soften the blow from defense spending caps in 2015 and beyond. In addition to troop costs, the OCO budget includes funding to support the Afghan military, repair battle-worn equipment repairs, and transport equipment back to the U.S.; however, it is also used as a “treasure chest” to fund procurement of systems and services not covered by the base budget. As Defense News stated in an op-ed this week, “OCO has been a giant slush fund that gets less oversight than the base budget.”
Technology Solutions Update
HP Enterprise Services announced a new high-security private cloud solution designed to accelerate government agencies’ migration to the cloud. HP Helion Managed Private Cloud for Public Sector (“Helion”) allows government entities to implement shared service models across multiple departments, and enables them to achieve operational efficiencies. Helion is currently undergoing FedRAMP assessments, and is expected to meet FedRAMP’s risk-based security requirements within the next six to nine months. HP has made significant investments in its cloud solutions in order to capitalize on positive trends within the Federal cloud market, which is estimated to reach $18.5 billion by 2018.
The General Services Administration (“GSA”) has suspended government wide-use of the Office Supplies 2 strategic sourcing contract, the GSA’s first and highly successful program to accelerate the government’s buying power through cross-agency purchasing agreements, following a protest filed by Coast to Coast Computer Products (“CTC”). CTC has argued that the Office Supplies 2 contract, which expired May 31st, has already been extended beyond its maximum allowable terms, and that any bridge contracts would violate requirements that give small businesses an opportunity to compete. A decision on the protest is due from the Government Accountability Office on September 8th.
Big Movers
Comtech Telecommunications Corporation (Up 18.6%) – Shares were up this week after the Company announced strong fiscal quarter results with earnings of $0.32 per share and revenue of $88.9 million, which beat analyst estimates by 77.8% and 14.7%, respectively.
Relevant Transactions
Moelis Capital Partners acquired PATS Aircraft Systems, LLC, a provider of aircraft services, components, and integrated systems to OEMs, airline operators, governments, and corporations. Terms of the deal were not disclosed.
Fulcrum Capital partners Inc. acquired Weatherhaven Global Resources Ltd., an engineer and manufacturer of portable shelters, camps, and systems for application in remote military sites worldwide. Terms of the deal were not disclosed.
B/E Aerospace Inc. to acquire EMTEQ, Inc. and F+E Fischer + Entwicklungen Gmbh & Co. Kg. EMTEQ provides interior and exterior lighting systems, cabin management solutions, and power systems for commercial aircraft. F+E Fischer provides seating products for civilian helicopters. B/E Aerospace will pay a combined $470 million for both acquisitions.
Good Technology, Inc. acquired the security business of Fixmo, Inc., a provider of defense-grade mobile device integrity and security solutions for the public and private sectors. Terms of the deal were not disclosed.
Noblis, Inc. acquired National Security Partners, LLC, a provider of consulting and technical services to the defense and intelligence agencies. Terms of the deal were not disclosed.
