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Matthew Potter
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Matthew Potter is a contributor at DefenseProcurementNews.com (http://www.Defenseprocurementnews.com/) as well as writing about life and politics at his personal site. After serving in the US Navy, he began work as a defense contractor in Washington DC specializing in program management and... More
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  • Northrop Grumman Facing Cut To Large Unmanned Aerial Vehicle (UAV) Program? 5 comments
    Jan 26, 2012 6:33 AM | about stocks: NOC, LMT

    Today the Pentagon begins to lay out its proposed cuts to its budget over the next ten years. Reportedly these could be as high as $50 billion a year from a $650-700 billion average spending plan.

    Rumors are floating that one of the casualties will be Northrop Grumman's (NYSE:NOC) Global Hawk strategic reconnaissance UAV. This is a major program for the company and has been in development and production since before 2000.

    The reports are a little confusing though as the decision seems to be ending one of the three versions in production and keeping the other two. The Block 30 would lose about half of its planned quantity while the Block 40 would continue along with the naval version, the Broad Aerial Maritime Surveillance (BAMS) system.

    Even though it is only part of the Global Hawk that may be cut it is still a blow to Northrop. The UAV has been one of their key programs with the Air Force, especially since they no longer sell a manned combat aircraft to the U.S. military. Revenue and earnings will suffer if the cut is made.

    If the budget is reduced by the amounts predicted the American military will be buying primarily just one aircraft, Lockheed Martin's (NYSE:LMT) F-35 Joint Strike Fighter. There will be little room for another aircraft to fit in the budget.

    Even though the U.S. has invested billions in UAV systems and plans to continue to do so, this decision shows that just because a company has a successful program it too may not be spared cuts or elimination.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: NOC, LMT
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Comments (5)
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  • jdben518
    , contributor
    Comments (17) | Send Message
     
    From everything I have read the Pentagon is spending more money on drones. They also delayed the delivery of the F-35 because it cost to much.
    26 Jan 2012, 02:19 PM Reply Like
  • Matthew Potter
    , contributor
    Comments (35) | Send Message
     
    Author’s reply » Thank you. That is why this story is a little confusing. The Global Hawk was desigend to replace the U-2. Keeping the U-2 while cancelling some of the Global Hawk production may save money in the near term but long term might have greater costs in operations and maintenance.
    26 Jan 2012, 02:25 PM Reply Like
  • jdben518
    , contributor
    Comments (17) | Send Message
     
    I forgot we were still using the U-2. What I might we might see is the high altitude long term blimp style UAV's. The report is confusing cutting and spending within the same segment.
    26 Jan 2012, 02:45 PM Reply Like
  • Matthew Potter
    , contributor
    Comments (35) | Send Message
     
    Author’s reply » Boeing is working on a ultra high endurance, high altitude UAV for strategic reconnaissance missions. That certainly could replace the U-2 or Global Hawk.
    26 Jan 2012, 02:57 PM Reply Like
  • jdben518
    , contributor
    Comments (17) | Send Message
     
    I would say Boeing should be field testing this soon but... it is Boeing
    26 Jan 2012, 06:36 PM Reply Like
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