Industry Week in Review – May 12, 2017
Aerospace & Defense Update
On Wednesday, Boeing announced it has temporarily paused test flights for the new 737 MAX aircraft after discovering an engine issue. The announcement came just days before Boeing planned to deliver its first 737 MAX aircraft to Malaysian carrier, Malindo Air. The Company must now receive re-approval from the U.S. Federal Aviation Administration (“FAA”) before the aircraft can take flight. It is not clear how long the engine approval process will take; however, Boeing still plans to deliver its first 737 MAX aircraft this month.
According to multiple reports, President Donald Trump’s senior military advisors are pushing for a significant increase to the number of troops in Afghanistan. Currently, ~8,500 U.S. troops and ~5,000 foreign ally troops are stationed in the area. The advisors also hope the President will allow the Pentagon to set its own troop numbers, instead of following the traditional White House recommendations. President Trump is expected to decide on the troop increase before the North Atlantic Treaty Organization (“NATO”) summit on May 25th. No formal plan has been announced or sent to Congress yet.
Government Technology Solutions Update
On Thursday, President Donald Trump signed into effect an executive order focused on cybersecurity, a document which has been anticipated since the White House’s original draft was pulled back in January. While the main objective of the new order is the improvement of the nation’s cybersecurity capabilities, it also includes IT modernization as an integral step in creating a more secure, interconnected, and efficient Federal system. The American Technology Council (“ATC”) will take the lead on exploring the feasibility of potential modernization initiatives. The ATC has been tasked with reaching out to agency heads in order to determine what the financial and technical requirements would be for moving agencies onto shared IT services. The White House hopes that, through the creation of a modernized and centralized IT infrastructure, the Federal government will be better prepared to withstand and counter cyber threats. While there have not been any specific new modernization initiatives announced, the ATC will have the next 90 days to meet with various agencies to determine the best course of action.
According to a recent report released by Deloitte, increased investment and implementation of artificial intelligence (“AI”) technologies can lead to significant cost and time savings for Federal workers. The report calculated that investment in AI might able to save between 96.7 million and 1.2 billion labor hours per year depending on the level of investment. That represents between $3.3 billion and $41.1 billion in cost savings annually. By investing in technologies such as machine learning, speech recognition, robotics, and natural language processing, workers will be able to automate large numbers of tasks such as filling in forms, writing to databases, and extracting data from documents. This would allow the government to sharply cut paperwork burdens and reduce backlogs. Deloitte’s report estimates that, with adequate investments in these technologies, the government workforce could potentially free up 30% of its time within five to seven years after the application of AI technologies to routine, automatable tasks.
Big Movers
Cubic (down 14.4%) – Share prices were down this week after Cubic missed earnings estimates.
AeroVironment (5.0%) – Share prices were up this week after AeroVironment began full rate production and shipment of its Mantis i45 EO/IR Gimbal Sensor Suite.
Transactions
Luminator Technology Group, LLC has acquired Apollo Video Technology, LLC, a provider of mobile video surveillance and fleet and information management solutions for law enforcement, military, and government applications. Terms of the deal were not disclosed.
VISTA Technology Services Inc. has acquired General Scientific Corporation, a provider of strategic planning, systems engineering, program management, network management, and other technical services primarily for Department of Defense (“DoD”) customers. Terms of the deal were not disclosed.
