Industry Week in Review – September 5, 2014

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Aerospace & Defense Update

General Dynamics secured a contract to deliver 589 of the company’s Scout Specialist Vehicles to the British Army beginning in 2017.  The $5.76 billion contract is the Ministry of Defense’s largest order for armored vehicles in roughly 30 years, illustrating the government’s commitment to modernize its military capabilities.  General Peter Wall, Chief of the British General Staff, commented on the significance of the contract saying, “the Scout Family is a transformational program that will refresh our armored capability and ensure the army remains a first-tier maneuver force.”  The Scout medium-weight armored vehicles will be used to replace an aging fleet of vehicles that has been in service for 40 years.  Currently, six versions of the vehicle have been designed and can perform roles including, but not limited to, reconnaissance and strike, joint fire control, ground-based surveillance, and repair and recovery.

On September 4th, Esterline Corporation announced that it is divesting three of its business units: Eclipse Electronic Systems, Pacific Aerospace & Electronics, and Wallop Defence Systems as well as a small distribution operation.  Curtis Reusser, Esterline’s CEO, said that although all three operations are good businesses, they would benefit from a closer strategic alignment with a different owner.  The divested businesses will be reported as discontinued operations beginning in 4Q14.

Government Technology Solutions Update

The One Acquisition Solution for Integrated Services (“OASIS”) indefinite quantity indefinite delivery (“IDIQ”) from the General Services Administration (“GSA”) is now open for agency business.  The notice, issued by the GSA on September 3rd, allows government agencies to begin purchasing professional services from companies that were awarded full and open awards back in May.  The OASIS Small Business notice to proceed was issued in late June.  Deltek estimates that the types of services OASIS provides cover a $60.0 billion market; the GSA could potentially capture 5-10% market share.  The Air Force is also expected to be a large customer with an estimated $1.4 billion in annual contract dollars flowing through OASIS.

Federal employees may receive a 1.0% pay raise in the near future due to President Obama’s recent proposal.  The raise is expected to take effect in January 2015, unless congress passes legislation blocking this proposal.  Years of pay freezes in the Federal Government have created a pay gap between Federal and private sector employees.  Without addressing this pay gap, the president of the National Treasury Employees Union, Colleen Kelley, feels Federal agencies will have a difficult time recruiting new workers to replace the 600,000 Federal employees that are eligible to retire by 2017.

Big Movers

TASER International, Inc. (Up 16.6%) – Shares were up this week after the Company announced that the New York Police Department will test the company’s body cameras.

Relevant Transactions

Information Innovators Inc. acquired Global Net Services, Inc., a provider of IT systems engineering, software development, and related services focused primarily on serving the Health IT solutions needs of the Food and Drug Administration.  Terms of the deal were not disclosed.

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Industry Week in Review – August 29, 2014

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Aerospace & Defense Update

On August 25th, Boeing Co. won an $8.8 billion order from BOC Aviation Pte (“BOC”), the Singapore-based aircraft leasing arm of Bank of China Ltd.  The order, consisting of 82 planes including 50 upgraded 737 Max 8s, 30 737-800s, and two wide-body 777-300ERs, is indicative of the company’s efforts to meet surging travel demand throughout Asia.  This order immediately follows BOC’s purchase of 43 jets from Airbus last month.  Many of BOC’s new aircraft were previously reserved for other buyers who subsequently cancelled their orders, including eight aircraft that the company has already received.  This purchase will help the company continue its transition to the 737 family and will ensure that BOC remains in the younger, more competitive end of the market with a fleet of the most fuel-efficient planes.  BOC expects to receive 27 planes per year starting in 2015, while simultaneously discarding 20 – 30 outdated planes annually.  BOC’s expansion strategy is supported by an expected 5.7% growth rate in air travel demand in Asia over the next four years.

The U.S. Special Operations Command (“SOCOM”) has signed a potential five-year $187 million contract for new Carl Gustav recoilless rifles and ammunition from the Swedish defense firm, Saab.  The agreement, which is for an initial order of $14.3 million, may reach upwards of $187 million over the next five years if SOCOM exercises its option to place additional orders for the 84mm recoilless system.  The U.S. adopted the weapon in 2011 when commanders in Afghanistan issued a special request for the system due to its proficiency in tight, close-quarters.

Government Technology Solutions Update

On August 20th, the Office of Management and Budget (“OMB”) released its Sequestration Update Report for Government Fiscal Year (“GFY”) 2015.  In it, the OMB detailed its estimates on the status of current appropriations levels compared to the capped levels implemented under the Budget Control Act of 2011.  Under the Senate’s currently proposed appropriations bills, defense agencies would face a $44.7 billion cut in discretionary spending while non-defense agencies would see a $27.6 billion cut compared to levels set by the 2013 Bipartisan Budget Act.  The currently proposed appropriations bills call for an additional $11.0 million cut to defense agencies.  Furthermore, the report determined that sequestration would not be a factor in GFY2015 as discretionary budget allocations remained in line with levels set by the Consolidated Appropriations Act of 2014.

The Department of Defense (“DoD”) is entertaining bids on its Defense Health Management System Modernization program, an $11.0 billion Indefinite-Delivery / Indefinite-Quantity Defense Health (“IDIQ”).  The contract will be used to modernize the DoD’s health records management system by acquiring and deploying an integrated suite of clinical and coding systems.  Responses to the Request for Proposal (“RFP”) are due on October 9th, and awards will be made in the third quarter of GFY2015.

Big Movers

Comtech Telecommunications Corp. (Up 8.3%) – Shares were up this week after the Company confirmed that it is exploring strategic alternatives, including a possible merger or sale, to enhance shareholder value.

Smith & Wesson Holding Corp. (Down 14.7%) – Shares were down this week after the Company released its first quarter earnings report, showing an 18% decline in sales and a 45% decline in net income compared to the first quarter of last year.

Relevant Transactions

J.F. Lehman & Company acquired Aeronautical & GI Holdings Ltd., a leading producer of proprietary situational awareness and LED lighting systems for naval vessels, military and commercial aircraft, and military ground vehicles.  Terms of the deal were not disclosed.

AAR Corp. acquired Cool Containers LLC, a manufacturer and supplier of temperature controlled cargo solutions.  Terms of the deal were not disclosed.

Datapipe, Inc. acquired Layered Technologies, Inc., a provider of enterprise secure cloud, dedicated, and hybrid hosting services to federal, state, and local government agencies.  Terms of the deal were not disclosed.

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Industry Week in Review – August 22, 2014

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Aerospace & Defense Update

On August 20th, the U.S. Navy selected five companies to develop and install a new shipboard tactical electronic network on its fleet over the next eight years.  The indefinite-delivery / indefinite-quantity contract was valued at $2.53 billion to install the shipboard network known as Consolidated Afloat Networks and Enterprise Services (“CANES”) aboard 180 units by 2022.  The five winners include:  BAE Systems Technology Solutions & Services, Inc., General Dynamics C4 Systems, Global Technical Systems, Northrop Grumman Systems Corp., and Serco, Inc.  Currently, nine destroyers have been outfitted and sixteen more are in progress.  The five companies will continue to compete for CANES delivery orders throughout the eight year period.  CANES relies on commercial off-the-shelf hardware and open systems architecture to keep the system’s costs well below initial projections.  A full deployment decision to authorize the program is expected by spring 2015.

The U.S. Air Force awarded Boeing a five year, $216 million contract to upgrade the fleet of 59 KC-10 aerial tanker / transports with new cockpit avionics.  Improvements will be made to the communication, navigation, surveillance, and air traffic management system in order to ensure that the fleet will comply with expected standards updates.  The Federal Aviation Administration and the International Civil Aviation Organization are working to mandate changes by 2015 that tighten the requirements for flying in civilian airspace without a permit, a matter that will significantly affect mission routes and fuel consumption.

Government Technology Solutions Update

This week, the Department of Labor (“DoL”) announced that modernization of their information technology (“IT”) infrastructure is a top priority despite budget stagnation.  To date, the DoL has one of the lowest Federal IT budgets and it has not seen a significant budget increase since 2010.  While limiting, the DoL now has significant room for change.  The department is currently consolidating internal customers into a centralized infrastructure, moving its financial system to a Federal shared service provider, and updating its IT governance structure to support these new projects.

Big Movers

TASER International, Inc. (Up 12.9%) – Shares were up this week as the Company announced strong revenue growth. Since the same quarter one year prior, revenues rose by 15.5%.

OHB Technology AG (Up 5.3%) – Shares were up this week as the Company began deployment of satellites for the European Space Agency in order to kick-off new generation of global-positioning satellites.

Relevant Transactions

Standex International Corporation acquired Enginetics Corporation, a leading producer of aircraft engine components for all major aircraft platforms.  The deal is worth an estimated $55.2 million.

Defense & Aviation Wiring Inc. to acquire the Manufacturing Division of Rutter, Inc., a producer of enhanced radar systems, including oil spill detection, ice navigator, and small target detection systems.  Terms of the deal were not disclosed.

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Industry Week in Review – August 15, 2014

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Aerospace & Defense Update

The U.S. Army recently selected Textron’s Bell division in partnership with Lockheed Martin and the team of Boeing and Sikorsky in a Joint Multi-Role program to each build a helicopter that could effectively replace hundreds of Black Hawk and Apache models.  The Army intends to use the two prototypes to assist in the evaluation of the service’s Future Vertical Lift helicopter replacement program, which could cost an estimated $100 billion.  The companies will leverage advances in engine and other technologies in the development of their demonstrator designs, which are expected to result in new helicopters being operational by the mid-2030s.  Bell and the Sikorsky and Boeing team are offering designs that make use of rotors capable of moving from their conventional positions for takeoff and landing to act as propellers for forward flight.  The long-term plan focuses on meeting the uptick in demand for a new generation of faster and more durable rotorcraft.

This fall, Boeing intends to announce plans to increase production rates of its 737 single-aisle jet.  Over the past four years, the company has escalated its production rates across all airplane programs 17 times.  An increase in production output before the end of the decade would facilitate Boeing’s efforts to open new and earlier delivery slots for customers, while helping to narrow a sales gap with Airbus’s A320neo.  737 Max jet production rates of 42 aircraft per month are expected to rise to 52 a month in 2018 or 2019 in response to an increase in global demand for single-aisle, narrow-body jets.

Government Technology Solutions Update

The Department of Defense (“DoD”) announced this week that it will identify a set of five pilot programs in the next twenty days to test commercial cloud solutions for sensitive data storage.  These pilot programs are initial steps towards giving the DoD confidence in moving its networks in the direction of agility and security at lower cost.  The move is part of a larger network modernization strategy driven by the Joint Information Environment.

Similarly, the Securities Exchange Commission (“SEC”) is moving raw data files to the cloud in order to support programs such as the Market Information Data Analytics System (“MIDAS”), as well as a host of other modernization projects.  The efforts are expected to save the SEC over $3 million a year and opens up opportunities for companies with big data analytics capabilities.  For example, MIDAS is able to sort through more than one billion trading records a day, a process that would take weeks or months without large-scale analytics capabilities.  The SEC’s move to the cloud has significantly increased internal capabilities as well as expanded the amount of trading information that the SEC makes available to the public.

Big Movers

Magellan Aerospace Corporation (Up 6.5%) – Shares were up this week after the Company released its second quarter earnings.  The Company reported gross profit and net income for 2Q14 of $34.5 million and $13.6 million, respectively, up from 2Q13 gross profit of $28.8 million and net income of $11.2 million.

Relevant Transactions

Denel SOC Limited to acquire BAE Systems Land Systems South Africa Proprietary Limited, a designer, developer, and manufacturer of mine protected armored vehicles and turret system.  The deal is worth an estimated $80.1 million.

Novetta Solutions, LLC acquired SigInt Technologies, LLC, a provider of advanced signals intelligence and intelligence analysis products and services.  Terms of the deal were not disclosed.

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Industry Week in Review – August 8, 2014

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Aerospace & Defense Update

Boeing and United Technologies have continued to amass reserves of titanium parts from a Russian producer to hedge against uncertainty surrounding international economic tensions as a result of conflict between Russian-backed separatists and the Ukrainian government.  As a whole, the aerospace and defense sector is the largest consumer of titanium, using the metal for various customized parts including components in landing gear and jet engines.  The two U.S. based aerospace companies purchase a significant portion of their titanium from VSMPO-Avisma, the world’s leading producer of the metal, as well as a subsidiary of a Russian government-owned company.  Boeing and United Technologies have built six month supply stockpiles of highly specialized parts.  Previously, Boeing had accumulated a three-year titanium stockpile, much of which has dried up since the company accelerated production of its 787 Dreamliner.  Ultimately, the stockpiles will provide Boeing and United Technologies the titanium necessary to keep up with production demand should trade sanctions with Russia cut off access to a large supply of the metal.

President Obama, on Thursday, authorized an open-ended military and humanitarianism mission in response to a request for assistance from the Iraqi government.  An air drop that provided an estimated 40,000 Iraqis with food, water, and other supplies kicked of the humanitarian mission earlier this week.  Following the air drop, two Navy F/A 18 Super Hornets dropped bombs on Islamic militants outside Irbil.  Although the President assured the U.S. would not reintroduce combat troops on the ground in Iraq, both air strikes and humanitarian drops will continue.

Government Technology Solutions Update

For the first time in eight years, the Federal Government has achieved the Small Business Administration’s (“SBA”) small business procurement goal of awarding 23.0% of eligible contracting dollars to small businesses.  According to the SBA, the Federal Government awarded $83.1 billion, or 23.4% of total Federal contracts, to small businesses in GFY2013.  Though the government reached its overall goal, results in subcategories were varied.  The government fell 0.7% short of its Women-Owned Small Business (“WOSB”) goal, but it exceeded the Small Disadvantaged Business (“SDB”) goal by 3.6%.

The General Services Administration (“GSA”) announced this week that it will give priority to open source software solutions for all new IT projects.  The change in policy was prompted by the GSA’s vision of using and providing Innovative, Integrated, and Intuitive (“I3”) technology solutions, not only within the agency, but across the Federal Government.  The new policy is just one part of a series of requirements that the GSA has implemented to drive innovation while reducing costs and time to development and deployment.

Big Movers

NIC, Inc. (Up 10.5%) – Shares were up this week after the Company announced a strong fiscal second quarter.  The Company reported $0.17 EPS exceeding analyst expectations of $0.15 EPS.

Rheinmetall AG (Down 11.1%) – Shares were down this week after the Company cut its sales and earnings forecast due to the cancellation of an export license tied to a deal that Rheinmetall AG had in Russia.

Relevant Transactions

Reliance Steel & Aluminum Co. acquired Aluminum Services UK Limited, a provider of aluminum castings manufactured for the aerospace, defense, domestic, automotive, and engineering industries.  Terms of the deal were not disclosed.

Vance Street Capital acquired Eirtech Aviation Ltd., a provider of aircraft maintenance services including refurbishment, painting, and engineering services. Terms of the deal were not disclosed.

HumanTouch acquired CorasWorks, a provider of applications and business software on the Microsoft SharePoint and social platform.  Terms of the deal were not disclosed.

Haystax Technology acquired NetCentrics, a provider of information technology consulting, software development, and process management firm.  Terms of the deal were not disclosed.

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Industry Week in Review – August 1, 2014

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Aerospace & Defense Update

Boeing recently released its second quarter earnings report, highlighted by a 1% rise in revenue and a 52% rise in net earnings compared to the same period last year.  The Company announced earnings per share of $2.42, beating analysts’ estimates of $1.99 by a considerable margin.  For 2014, the Company now projects full-year earnings in the range of $7.90 – $8.10 per share, up from the previous estimate of $7.15 – $7.35 per share.  Notable accomplishments during the quarter include the delivery of its first 787-9 aircraft and its 8,000th 737.  Although the company’s commercial airplanes segment boasted strong performance, its defense segment witnessed declining revenues compared to the second quarter last year, a common trend throughout the defense industry.  Furthermore, Boeing disclosed a design flaw in its KC-46A aerial refueling tanker that is costing the Company an additional $272 million.

A number of flight restrictions placed on the F-35 Joint Strike Fighters were lifted earlier this week.  The Pentagon relaxed speed restrictions on the aircraft from Mach 0.9 to Mach 1.6 and eased maneuverability limits from 3 Gs to 3.2 Gs.  Other restrictions, stemming from a June 23rd engine fire on an F-35, are still in place and threaten to delay the initial operating capability dates for the jet.  Despite a number of setbacks, top Air Force generals continued to express confidence in the aircraft.  General Mark Welsh praised the jet saying, “The F-35 is the answer, the only answer, to ensure future air campaigns are not a fair fight.”  The F-35 program was also defended by General Michael Hostage who proclaimed the U.S. will “have a fleet that will defend this country as far into the 2030s as we expect it to.”

Government Technology Solutions Update

On July 28th the House passed the National Cybersecurity and Critical Infrastructure Protection Act, a conglomerate of three bills designed to enhance public-private information sharing and expand cybersecurity efforts in the Department of Homeland Security (“DHS”).  The bills require that cybersecurity systems be updated regularly, allow entities to submit cybersecurity procedures to gain liability protection, and facilitate real-time sharing of cyber threat information between the DHS and critical industries.  Additionally, the Act intends to strengthen cyber security personnel efforts by issuing a standard classification for cyber activity employees, and using these classifications to fill in any gaps in DHS’ workforce.

The National Geospatial-Intelligence Agency is developing a new pilot program, the GEOINT Solutions Marketplace (“GSM”), to expand industry partnerships and facilitate a faster acquisition cycle for capabilities.  The GSM will be used to send out a needs statement to vendors, allow vendors to respond with their proposed solutions and capabilities, and provide an online environment where capabilities can be demonstrated.  This system will allow the industry, and especially small businesses with niche capabilities, to address broader problems that a single company may not be able to handle alone.

Big Movers

Ducommun, Inc. (Up 18.1%) – Shares were up this week after the Company announced a strong fiscal second quarter, reporting a 17.6% increase in net income over the same period last year.

KEYW Holding Corporation (Down 17.7%) – Shares were down this week after the Company released its quarterly earnings, missing both earnings per share and revenue projections.  The Company missed analysts’ earnings estimates by $.02 per share, and posted revenue of $74.2 million, a decrease of 5% versus the same period last year.

Relevant Transactions

Undisclosed Buyer to acquire Rockwell Collins Inc.’s Satellite Communications Business, a designer and manufacturer of mobile satellite communications systems for military, government, and commercial markets.  The deal is worth an estimated $10 million.

Precision Aviation Group, Inc. acquired Aviation Controls, Inc., a provider of maintenance, repair, and overhaul services for engine accessories, specializing in components for GE J-85, Honeywell LTS-101, and Rolls Royce 250 engines.

BAE Systems plc to acquire Signal Innovations Group, Inc., a provider of decision systems for various sensor and data types for government customers and industry partners in national security, public safety, and commercial surveillance sectors.  Terms of the deal were not disclosed.

Novetta Solutions, LLC acquired Global News Intelligence, a provider of sentiment and influence analytics that supports commercial and government clients in the U.S. and abroad. Terms of the deal were not disclosed.

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Industry Week in Review – July 25, 2014

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Aerospace & Defense Update

This week, Bombardier Inc. unveiled plans to revamp its organizational structure as President and Chief Operating Officer of Bombardier Aerospace since 2008, Guy Hachey, stepped down.  Previously organized as two separate divisions, Aerospace and Transportation, Bombardier is attempting to re-define its business with a new structure, which will include four unique business segments: Transportation, Business Aircraft, Commercial Aircraft, and Aerostructures and Engineering Services.  Each department will begin reporting directly to Chief Executive Pierre Beaudoin effective immediately, while the more formal restructuring plan will be developed over the next few months so that complete implementation can be finalized by January 1, 2015.  The Company cited reduced costs, increased efficiency, and improved flexibility in meeting customer needs as the rationale behind the restructuring which is expected to shed up to 1,800 jobs.  Analysts have speculated about a potential spin-off of one of the businesses for cash or strategic direction as a possible motive behind the overhaul.  The outlined changes coincide with Bombardier’s preparation for the commercial launch of its CSeries aircraft, which will compete head-to-head with narrow-body twin-engine aircraft from Boeing and Airbus.  The launch of the CSeries has been plagued by setbacks, most recently involving a major engine failure that caused damage to a test plane.  However, the Company expects test flights to resume in the coming weeks.

Government Technology Solutions Update

On July 24th, House Speaker John Boehner announced that the House will pass a short-term continuing resolution to keep the government open in September, in order to avoid a government shutdown that would otherwise take place on the last day of September.  The House will return from their August recess on September 8th, and have 10 legislative days to pass the continuing resolution which would likely expire early in December.  The Senate is scheduled to be in session for 17 days in September, providing additional time to deal with a house-passed continuing resolution.

Big Movers

Tyler Technologies, Inc. (Up 11.5%) – Shares were up this week after the Company posted earnings for the second quarter.  The Company’s earnings per share of $0.52 beat analyst estimates by $0.07, and quarterly revenue of $124.4 million far surpassed consensus estimates of $117.5 million.

Precision Castparts Corp. (Down 9.6%) – Shares were down this week after the company released its quarterly earnings, missing both earnings per share and revenue projections.  The Company posted earnings per share of $3.32, missing consensus analyst estimates by $0.03, and posted revenue of $2.53 billion, just shy of the consensus estimate of $2.58 billion.

Relevant Transactions

World Fuel Services Corp. to acquire Colt International, Inc., a provider of fuel and aviation services for private aviation clients, corporate flight departments, and vendors around the world.  The deal is worth an estimated $176.2 million.

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Industry Week in Review – July 18, 2014

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Aerospace & Defense Update

The biannual Farnborough Air Show was underway this week, drawing major players from the aerospace industry to the historic airfield in Hampshire, England.  For manufacturers, the show offers a chance to highlight new product innovations and capabilities, while for airlines, the show is an opportunity to see new designs and place purchase orders.  Companies including industry heavyweights Boeing and Airbus were in attendance, as well as many smaller firms, all attempting to book purchase orders as the week-long show winds to a close.  Airbus recorded orders for 496 jets valued at $75.3 billion, beating out rival Boeing’s 201 aircraft worth $40.2 billion.  Their combined sales figure of $115.5 billion is lower than last year’s Paris Air Show where the rivals combined for $134.7 billion in sales.  According to analyst estimates, Airbus’ great showing brings their total tally of firm orders to about 650.  However, Boeing entered the week with 649 firm orders.  Coupled with sales unrelated to Farnborough, at the end of the week, Boeing has 783 firm net orders for the year.  Both Airbus and Boeing have already booked deals for more airplanes than they can build in 2014 alone, despite a year of record-high production numbers.  However, one of the biggest stories of the week was surrounding the F-35 aircraft, valued at approximately $80 million per plane.  The aircraft was absent from the air show, as the $400 billion program has had multiple setbacks recently, with the combination of stealth, maneuverability, and attack capabilities in a single aircraft making it vulnerable to multiple complications.

Government Technology Solutions Update

The Senate Appropriations Defense Subcommittee approved a bill on July 15th that would reduce the IT budget for the Department of Defense (“DoD”), as outlined in the President’s FY2015 budget, by $500 million. The Defense Subcommittee justified lower spending levels by stating their focus on prioritizing other investments, such as advanced national security technologies and DoD medical research.

The Centers for Medicare & Medicaid Services (“CMS”) awarded 15 spots on a five-year, $7 billion Indefinite Delivery Indefinite Quantity (“IDIQ”) contract, designed to help CMS develop and test payment and service delivery models for the Children’s Health Insurance Program (“CHIP”). Services under the contract will include data analytics, modeling and simulation, and program-specific research.

Big Movers

AECOM Technology Corporation (Up 10.5%) – Shares were up this week after the Company announced plans to acquire URS Corporation in a $6 billion dollar deal

Meggitt PLC (Up 10.1%) – Shares were up this week following rumors of a potential sale of the Company, including United Technologies Corporation’s plans to submit a £5.0 billion ($8.5 billion USD) bid to acquire the Company.

Relevant Transactions

AECOM Technology Corporation to acquire URS Corporation, a provider of engineering, construction, and technical services to public agencies and private sector clients worldwide.  The deal is worth an estimated $6 billion.

Liberty IT Solutions LLC acquired Warrior Technology, a provider of applications and software development, program management, systems integration, information assurance, and enterprise architecture services.  Terms of the deal were not disclosed.

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Industry Week in Review – July 11, 2014

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Aerospace & Defense Update

Boeing released its Current Market Outlook this week for 2014 through 2023, identifying several important trends in the aerospace market over the 20-year forecast period.  Most notable among these is a 3.2% growth in global GDP, driving passenger and cargo plane traffic growth 5.0% and 4.7% annually, respectively.  These projections lead to long-term demand for 36,770 new airplanes valued at $5.2 trillion, with 70% of those aircraft characterized as single-aisle jets.  Geographically, Asia Pacific, North America, and Europe have the largest growth projections, expecting to add 13,460; 7,550; and 7,450 aircraft to their fleets by 2033, respectively.  Of the 36,770 planes being added, 42% are planned to replace aging aircraft while 58% contribute to overall growth of the global fleet.

Additionally, Boeing has finalized a deal with Emirates Airlines to deliver 150 777X wide-body jets, a deal worth $56 billion.  The 777X  is a new generation aircraft expected to go into production in 2017 with first delivery scheduled for 2020.  The deal grants Emirates the option to purchase an additional 50 aircraft, adding $19 billion in value if exercised.  This news comes as a blow to rival Airbus, particularly on the heels of Emirates’ cancellation of an order for 70 of Airbus’ A350 aircraft for $16 billion last month.

Government Technology Solutions Update

The Army released plans for a five-year, $250 million indefinite-delivery, indefinite-quantity contract developing and supporting Intelligence, Surveillance, and Reconnaissance technologies for the Army Research Laboratory Sensors and Electron Devices Directorate, with a focus on enhancing the directorate’s capabilities in persistent surveillance and open source intelligence.  The draft request for proposal outlines several functionalities, including operational support, engineering and design, and integration services.  Task orders under the contract will include work related to sensors, cloud computing, multi-source data fusion, and signal processing.

The General Services Administration (“GSA”) is considering a new category for cloud computing services in its IT Schedule 70 program.  The new Special Item Number would simplify cloud computing service purchases, and provide agencies with greater access to consolidated services.  The GSA issued a Request for Information on July 10th seeking to gain a better understanding of how companies currently sell cloud computing services, specifically as it relates to pricing and data migration requirements.

Big Movers

API Technologies Corporation (Down 15.1%) – Shares were down this week after the Company announced disappointing fiscal first half results, posting a net loss of $17.1 million.  The Company reported earnings per share of ($0.27), greatly missing consensus estimates of ($0.01).

Relevant Transactions

Vista Equity Partners acquired Social Solutions, Inc., a provider of performance management software solutions for federal, state, and local government agencies in the United States and Canada. Terms of the deal were not disclosed.

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Industry Week in Review – July 3, 2014

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Aerospace & Defense Update

Boeing had a successful week, securing two major contracts and bidding on a third.  The Company announced earlier this week it won a $1.9 billion award to produce 44 F/A-18 Super Hornet and EA-18G Growler aircraft for the U.S. Navy and the Australian government.  The contract is part of a previously announced appropriation, and not an attempt to secure additional funds for new aircraft.  In addition, Boeing also won a $2.8 billion contract from NASA to develop the core stage of a Space Launch System rocket, destined to send humans beyond the moon’s orbit for the first time.  Lastly, Boeing was one of three companies bidding on a South Korean program for refueling tanker aircraft.  Boeing’s 767-based KC-46 aircraft will need to beat competitors Airbus and Israel Aerospace Industries Ltd. to win the $1.38 billion award.  Boeing and Airbus are currently in a global competition to fill demand for refueling planes; Airbus serves Australia, Saudi Arabia, U.A.E., the U.K., and Singapore while Boeing has a hold over the U.S. market.  In 2011, the U.S. Air Force awarded Boeing a $52 billion contract to develop and buy refueling planes to replace its aging fleet.  Ultimately, the South Korean contract will serve as an important part in providing a boost in the successful awardee’s defense business.

Government Technology Solutions Update

The General Service Administration and the Department of Homeland Security are finalizing Task Order 2 under Phase 2 of the Continuous Diagnostics and Mitigation (“CDM”) program, which is meant to streamline the steps toward enhanced cybersecurity protections for agency networks and computers.  The future phases will be aimed at enhancing CDM capabilities and expanding the program’s initial focus of increasing interconnectivity on the cyber dashboard.  The six upcoming contract awards, under Task Order 2, are set to be awarded over the next nine months and are expected to “[deploy] the initial baseline capability to all of [the dot-gov] agencies to raise the cyber awareness and critical protection of [these] agencies”.

In a step towards the Obama Administration’s goal of expanding the use of cross-agency shared services, providers will implement improvement plans later this month to increase shared service capabilities and provide these services to more agencies.  The Office of Management and Budget and the Department of the Treasury are also expected to establish government-wide guidelines for shared services governance by the end of August.  Over the next few months, the Obama Administration plans to monitor the number of agencies migrating to these new shared services and review customer satisfaction and service adoption metrics to ensure progress is being made.  Ultimately, the end goal of the initiative is to reduce duplicative investments and improve government-wide transparency and reporting over the long-run.

Big Movers

API Technologies Corporation (Up 7.8%) – Shares were up this week after the Company announced it received a new order to supply high-power amplifier systems as part of a Department of Defense maritime requirement.  No terms were disclosed in the award, but it is expected to be a multi-million dollar program with first production delivery set for May 2015.

Relevant Transactions

Nexter Systems to merge with Krauss-Maffei Wegmann.  Nexter Systems provides land defense systems for the French army and other forces internationally.  Krauss-Maffei Wegmann provides wheeled and tracked vehicles for civil and military simulation, and day and night missions.  Terms of the deal were not disclosed.

H-D Advanced Manufacturing Co. acquired Sungear Inc., a provider of complex, high quality, precision gear components and assemblies for the aerospace industry.  Terms of the deal were not disclosed.

Saab AB to acquire ThyssenKrupp Marine Systems AB, a designer and builder of submarines and naval surface ships, offering independent propulsion systems, rescue systems, and mine clearance systems.  The deal is worth an estimated $51.5 million.

Defense Conseil International S.A acquired Vigie Aviation, a provider of aerial video, airborne maritime surveillance relating to search and rescue, and coastal monitoring.  Terms of the deal were not disclosed.

Versar, Inc. acquired J.M. Waller Associates, Inc., a provider of environmental, facilities, engineering, technical, and logistics consulting and management services.  The deal is worth an estimated $13 million.

Lockheed Martin to acquire Zeta Associates, Inc., a provider of software-based communications signal collection and processing systems.  Terms of the deal were not disclosed.

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