Industry Week in Review – June 20, 2014
Aerospace & Defense Update
The U.S. House of Representatives voted this week to block the Air Force’s plan to cut its entire A-10 fleet during deliberation on the FY2015 defense spending bill. The chamber approved the amendment, proposed by Rep. Candice Miller (R-Mich.), which would prohibit the Pentagon’s potential divestiture, retirement, transfer, storage, or cutting of any A-10 aircraft. This vote is the latest in a prolonged battle between the Department of Defense and Congress on the future of the aging but popular aircraft. The Air Force’s plan would replace the A-10 missions with F-15, F-16, or C-130 missions, saving the service about $3.7 billion. Air Force Secretary Deborah Lee James supported their decision with rationale that the A-10 is a single-mission attack aircraft whose missions can be covered by other aircraft with more versatility. However, the proposal has been met by staunch opposition in the House and Senate, which both already approved amendments to the 2015 National Defense Authorization Act prohibiting the retirement of the A-10. Language in the bill states that the U.S. comptroller general would make multiple certifications and complete studies on the impact of retiring the A-10. A final decision on the fate of the aircraft will not be decided until the official FY2015 defense spending bill is finalized and passed.
Technology Solutions Update
The DoD is testing the viability of cloud-based cybersecurity for certain mission-critical systems within the department. Currently, Federal Risk and Authorization Management Program (FedRAMP) approved cloud service providers (“CSP”) are able to seek DoD approval to support low and moderate-security systems, referred to as impact level-1 and impact level-2 systems. The DoD’s new pilots are aimed at addressing the security needs of more sensitive systems, referred to as impact level-3. These pilots suggest that CSPs pursuing level-3 systems will be required to meet significantly higher security standards, and authorization to support such data will be more stringent than low to moderate data types. Today, there are only a few CSP’s that have been authorized to host level 1 and level 2 systems, but the potential to support level-3 systems may present additional opportunities for qualified CSPs to receive DoD approval.
In order to improve network performance, the Navy is seeking vendors for rapid upgrades to the Navy Marine Corps Intranet (“NMCI”), the Navy’s enterprise network designed to provide secure and reliable information transfer across the continental United States. The Navy is especially interested in procuring enhanced cybersecurity capabilities, data center consolidation, and mobile computing technologies.
Big Movers
KBR, Inc. (Down 7.4%) – Shares were down this week after the Company announced disappointing fiscal first quarter results, reporting a loss of $0.29 per share. Additionally, the Company announced it will review its business strategy following continuous revenue declines.
Relevant Transactions
Sierra Nevada Corporation to acquire Orbital Technologies Corporation, a provider of space subsystem integration and liquid rocket propulsion, life science and support, and fire suppression capabilities. Terms of the deal were not disclosed.
Lockheed Martin Corporation to acquire Deposition Sciences, Inc., a provider of thin optical film used in coating metals, lenses, lighting, and mirrors for military and aerospace customers worldwide. Terms of the deal were not disclosed.
Saint-Gobain acquired Phoenix Coating Resources, Inc., a provider of ceramic ingots used to produce high-resistance thermal coatings for the aeronautics industry. Terms of the deal were not disclosed.
Intelligent Decisions, Inc. acquired Quantum 3D’s ExpeditionDI Product Line, a provider of human-worn, fully immersive team simulation solutions used for infantry training. Terms of the deal were not disclosed.
