Industry Week in Review – March 20, 2015
Aerospace & Defense Update
Finmeccanica CEO Mauro Moretti announced that the Company will delay its decision regarding the potential sale of its U.S. subsidiary, DRS Technologies. Initial discussions around a sale of DRS began last summer. More recently, Moretti said the Company was seeking a partner to help run the unit, while divesting DRS’s Aviation and Logistics unit and its Training Communications and Network solutions unit. On Thursday, however, Moretti appeared more bullish about DRS in a meeting with analysts to discuss Finmeccanica’s 2014 results. He asserted that DRS is “registering good results, a change of the curve, a change of the trend at DRS of the last few years”. Ultimately, the Company has delayed any decisions around the future of the unit until September when second quarter results have been analyzed.
German defense company Rheinmetall AG said on Thursday that it expects its defense division to return to profitability this year. In 2014, the Company’s group net profit fell nearly 38% and it cut its dividend by 25%. Notably, the defense unit reported a loss of roughly $89 million last year, including a $49 million fine related to bribery charges in Greece. Rheinmetall forecasts a 2015 profit margin based on earnings before interest and taxes (“EBIT”) of 3% for its defense business, as it intends to grow operations outside of its domestic market, despite stricter German regulations on arms exports.
Government Technology Solutions Update
The U.S. Army has committed $500 million a year in spending through General Services Administration’s (“GSA”) One Acquisition Solution for Integrated Services (“OASIS”) contract. The agreement is similar to a $500 million spending commitment by the U.S. Air Force in December 2013 and is part of a tiered fee structure pilot program initiated by the GSA. While other agencies pay 0.75% to use OASIS, the Army will instead pay a 0.10% fee. The use of OASIS seeks to minimize duplicative contracting efforts, reduce administrative costs, and help the service meet small business goals. The Army and GSA are also discussing the use of select Defense Federal Acquisition Regulation Supplement (“DFARS”) requirements in OASIS to speed up DoD procurement through the vehicle; if implemented, OASIS will be the first civilian contract with DFARS requirements.
National Aeronautics and Space Administration’s (“NASA”) successful migration of services to a public cloud environment has become a flagship example for the Federal government. Since starting in spring 2013, NASA has migrated ~160 applications to the cloud and hosts ~85% of applications and websites through public or hybrid cloud environments. After this transition, the Administration saw a 40% drop in operations and maintenance costs which has already covered the expense of the migration. NASA has layered its internal security solutions with their cloud provider’s (Amazon) and cloud integrator’s (InfoZen) security capabilities to address the largest concern around cloud implementation – cyber security.
Big Movers
Raytheon Co. (Up 5.5%) – Shares were up this week after the Company announced that it will increase its annual dividend by 10.7%.
Vectrus Inc (Down 22.0%) – Shares were down this week after the Company reported fourth quarter and fiscal year 2014 earnings, including $285.8 million in revenue for the quarter and $1.2 billion in revenue for the full year.
Transactions
Sparton acquired Stealth.com Inc., a configurator of high performance industrial grade computer systems and peripherals. Terms of the deal were not disclosed.
Motorola Solutions Venture Capital made a strategic investment in CyPhy Works, Inc., a provider of advanced unmanned aerial vehicles (“UAVs”). Terms of the deal were not disclosed.
Panasonic Avionics Corp. acquired ITC Global, a provider of satellite communication services for the energy, mining, and maritime markets. Terms of the deal were not disclosed.
Curtiss-Wright Corporation acquired Bolt’s Metallizing, Inc., a provider of thermal spray coatings for critical aerospace applications, including high velocity oxygen fuel (“HVOC”) and plasma spray coating capabilities. Terms of the deal were not disclosed.
KeyW acquired Ponte Technologies, LLC, a provider of operational IT security solutions, IT security strategies, and advanced defensive capabilities. Terms of the deal were not disclosed.
KeyW acquired Milestone Intelligence Group, Inc., a provider of cyberspace security, software engineering, system engineering, and test and evaluation services. Terms of the deal were not disclosed.
