Industry Week in Review – June 29, 2018

Aerospace & Defense Update

The Pentagon and Lockheed Martin are closing in on a deal for the 11th lot of F-35s, which includes more than 130 jets.  The deal was initially planned to close by the end of 2017, but negotiations between the two parties stalled delaying finalization.  Negotiations for the F-35’s Lot 9 reached an impasse in November 2016 until the government ultimately forced Lockheed into a $6.1 billion deal by imposing a unilateral contract agreement.  All three F-35 variants for Lot 11 are expected to be cheaper than previous procurements.

On Thursday, the House passed its version of the annual defense appropriations bill, which budgets $675 billion to the Defense Department.  The bill plans for the dual purchase of two aircraft carriers, CVN-80 and CVN-81, but does not include the purchase of additional submarines.  Compared to the Senate Appropriations Committee, the House approved four more F-35 fighter jets, one more littoral combat ship, and the Advanced Battle Management System to replace the JSTARS recapitalization plan.  The dual purchase of the aircraft carriers is expected to save up to $2.5 billion in construction costs.  Despite the savings, each carrier is anticipated to cost $10 billion, which could create problems with budget caps.  These concerns ultimately led to the exclusion of three Virginia-class submarines per year starting in 2022.  The Senate Appropriations Committee advanced its version of the bill on Thursday as well, but it is still unclear as to when the full Senate will vote on it.

Government Technology Solutions

With the 2020 Census quickly approaching, officials have noted concerns around protecting its inherent data, given growing fears about the lack of cyberattack preparedness among many federal agencies.  A recent report by the Office of the Management and Budget (“OMB”) points out 71 of the 96 federal agencies reviewed were “at risk” or “at high risk” of a cyberattack.  Department of Commerce Chief Information Officer (“CIO”) Rod Turk said Tuesday that he hopes that the intelligence community (“IC”) will help monitor potential cyberattacks, particularly given that the 2020 census plans to utilize more technology systems than any previous decennial census.  Turk mentioned that protecting the census’ networks will be critical, as the census is not only used to collect information, but also to help determine federal funding levels for a variety of infrastructure systems.  The 2020 Census will utilize more than 40 IT systems, including new online response and mobile assist functions, increasing the vulnerabilities of the survey and opportunities for a cyberattack.  Turk suggested that the IC could use artificial intelligence and machine learning to identify threats and added that the Commerce Department has already sought out “private sector intelligence gathering services” to help it track threat indicators on the dark web.

The strategy of integrating a federal agency’s engineering and operations (“DevOps”) to perform large-scale cloud migration might soon be replaced by a new strategy, No Operations (“NoOps”).  The concept of NoOps centers around expanding the role of cloud companies to provide infrastructure management services normally overseen by an agency’s IT department.  This shift in federal cloud migration management comes as cloud companies are increasingly providing cloud services where they not only code and update, but also manage the IT infrastructure in the background.  Although NoOps would increase an agency’s dependence on outside cloud providers, it would provide cost savings and allow customer’s engineering teams to focus their efforts on developing mission critical systems.

Big Movers

Safran (up 4.7%) – Share prices were up this week after the company announced a planned collaboration with Bell Helicopter to develop an electric air taxi.

American Outdoor Brands (down 5.0%) – Stock prices continued to slide this week after blaming social activists for its poor performance.


Imenco AS has acquired Kongsberg Maritime AS’s Camera Division, a provider of subsea cameras and harsh environments CCTV systems. Terms of the deal were not disclosed.

Zivaro, Inc. (formerly Global Technology Resources, Inc. (GTRI)) has agreed to acquired Network Professionals Group, LLC (NPG), a provider of value-managed service offerings supporting hybrid information technology systems. Terms of the deal were not disclosed.

Goshawk Aviation Limited has agreed to acquire SKY Aviation Leasing International, a provider of full-service leases for premier aircraft. Terms of the deal were not disclosed.

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