Northrop Partnering With Israeli Satellite Builder - WSJ

Wall Street Journal reports Northrop Grumman Corp. will announce today an exclusive partnership with Israel Aerospace Industries Ltd. to buy and modify several Israeli-built low-cost high-resolution satellites for proposal to U.S. military and intelligence. The under-$200 million satellites cost a fraction of standard satellites, giving the government "a cost-effective way to watch our adversaries," according to Northrop official Jeffrey Grant. The Journal calls the strategy surprising, because it is far from certain the Defense Department would use foreign technology for classified intelligence collection. Northrop proposes an initial deployment of an 8 satellite network at a cost of less than $1.6 billion (vs. $20 billion for the same low-orbit platform using conventional satellites), that has the additional advantage of becoming operational 'long ahead' of any homegrown option. Last year China shot down its own satellite; since then the DoD has begun pushing for an inventory of smaller, cheaper satellites. Northrop is in competition with Lockheed Martin to build a comprehensive radar system, and is betting the smaller networks would help fill coverage gaps frequent in passes of larger satellites. Other players in the small-satellite market include Raytheon and Orbital Sciences.

Sources: Wall Street Journal
Commentary: Boeing Capitalizes on Global Defense • Investment Implications of China's Satellite Killer • 15 Stocks I Expect To Breakout
Stocks/ETFs to watch: Northrop Grumman Corp. (NOC), Raytheon Company (RTN), Orbital Sciences Corp. (ORB). Competitors: Lockheed Martin Corp. (LMT), General Dynamics Corp. (GD). ETFs: PowerShares Aerospace & Defense (PPA), iShares Dow Jones US Aerospace & Defense (ITA)

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