Nouvelles

By: Jill Aitoro WASHINGTON — The secret to tackling the defense information technology market may be scale. Looking specifically at the pure-play IT companies that landed on the 2018 Defense News Top 100 list, many of those that have doubled down in some capacity saw defense revenue increase during fiscal 2017. That came on the tail end of another trend among the largest defense primes, to get out of the IT business. “The evolution started a couple years ago, where the large defense primes who had boned up on IT service work during the war [on terror] started to realize that for a variety of reasons they might not be able to compete as effectively, or extract the returns they want out of a business like that,” said Jon Raviv, senior analyst and vice president for aerospace and defense at Citi Research. Divestitures followed, and pure-play IT companies were able to quickly scale up not just in size and their ability to support massive contracts, but also in capability set. The acquisition of Lockheed Martin's IT business transformed Leidos from a $5 billion company to a $10 billion company. That deal closed in late 2016, explaining how the company saw double-digit growth in defense revenue in both 2016 and 2017 — despite the buy actually making the company less defense heavy overall. Similarly, CACI closed on the acquisition of L3 Technology's National Security Solutions for $550 million in February 2016 — three months before the end of its fiscal year. The associated revenue contributed to the 16 percent increase in defense revenue during 2017. Leidos CEO Roger Krone, in an interview with Defense News in 2016 soon after the acquisition closed, pointed to “scale, but not scale for scale's sake” as a big factor in the buy — noting, too, the importance of balancing the portfolio and geographic distribution. He also pointed to sheer numbers — 15,000 employees specifically — many with security clearances. The trend does seem to be continuing. CSRA chose to not participate in the 2018 Top 100 because its $9.7 billion acquisition by General Dynamics closed by the time data collection for the list kicked off. While General Dynamics is a top defense prime, its IT business functions as a largely separate entity, similar to the pure-play IT companies. The acquisition of CSRA, which reported $2.25 billion in defense revenue for fiscal 2016 — will add significant scale to GDIT. It is also likely to influence the company's Top 100 rank next year. The future promises more cyber and IT-related merger and acquisition activity in the vein of that deal, according to Daniel Gouré, a vice president with the Lexington Institute think tank. “Raytheon is still in acquisition mode with cyber, so it's an area that's still kind of churning,” he said. “I wouldn't be surprised to see some of these big players acquire some of the more defense-oriented cyber players.” Unclear is what the sweet spot may be for those exclusively IT-focused firms. “Where we sit right now, it's not clear what the right size is,” Raviv said. “GDIT and Leidos are about $10 billion in sales; SAIC and CACI and ManTech are lower tier. All of those companies say they are happy with scale but could do a deal. Whether they call it scale, or marrying capability sets — it's all marketing, I suppose.” And there are other tactics that achieve scale without acquisition. Perspecta emerged on the 2018 Top 100, having launched June 1, 2018 through the combination of DXC Technology's U.S. public sector business, Vencore, and KeyPoint Government Solutions. As one entity, Perspecta reported $2.73 billion in defense revenue and ranked 37. To put that in perspective, Vencore ranked 67 in last year's list, with $886.59 million in defense revenue. And all of these pure-play companies are increasingly marketing themselves as conduits to the “nontraditional players” that the Pentagon is so keen to attract. Amazon Web Services, for example, will often partner with government IT companies on defense contracts to hand off some of the contracting morass. That said, for all the potential, the bulk of the defense IT market is notoriously fickle. Services often set aside IT projects in an effort to preserve platform buys, and margins can be low. Agencies also struggle to balance upkeep of existing systems versus modernization efforts versus research and development into the next great technological marvel. But as Raviv noted, it's all IT. “Yes, there are companies working on high-end cyber, the ability to launch attacks through cyberspace or to harden the communication node on a new missile so it can't be hacked by, say, China. And while the word cyber came up a lot three or four years ago, now you hear a lot about AI, autonomy and machine learning. But it's all technology. And it's a lot of smart people working on a lot of advanced things many of us don't understand.” https://www.defensenews.com/top-100/2018/08/09/for-it-companies-the-secret-to-success-in-defense-is-all-about-big-growth/

Ott Ummelas Donald Trump has taken credit for a rise in military spending by NATO states, but in the alliance's eastern reaches, it's his Russian counterpart, Vladimir Putin, who's driving the rearming effort. Last month, North Atlantic Treaty Organization Secretary General Jens Stoltenberg thanked the U.S. President for “clearly having an impact” on defense spending by allies while Trump said his demands had added $41 billion to European and Canadian defense outlays. But the jump in acquisitions behind the former Iron Curtain of aircraft, ships and armored vehicles began when Russia annexed Crimea from Ukraine, well before Trump's 2016 election victory, according to analysts including Tomas Valasek, director of Carnegie Europe in Brussels. While the median defense expenditure of NATO members is 1.36 percent of gross domestic product, below the alliance's requirement of 2 percent, eastern members comprise seven of the 13 members that are paying above that level. “Countries on NATO's eastern border do not need Donald Trump to boost defense spending,” Valasek said. “They decided this long before he came to power. The spending boost was because of a president, but it was Vladimir Putin, not the U.S. President.” Constant overflights by Russian aircraft into NATO airspace, cyberattacks on government and military installations, wargames on the borders of the Baltic states and accusations that Russia was behind a failed coup in newest member Montenegro have put NATO's eastern quadrant on alert for what it says is an increasingly expansionist Russia. Of the 15 members exceeding the bloc's guideline that 20 percent of total defense spending should go to equipment, six are from eastern Europe. At the time of the NATO summit in Brussels, Romania said it would buy five more F-16s from Portugal, raising its squadron to 12, after it signed a $400-million deal to acquire a Patriot missile air-defense system with Raython in May. The country of 20 million people bordering Ukraine, Moldova and the Black Sea plans to buy 36 more F-16s, four corvettes, at least 3,000 transport vehicles and coastal gun batteries over the next five years. Slovakia also announced the purchase of F-16 fighter jets at the summit to replace its aging Russian Mig-29s in a deal that was years in negotiating. And last month, Bulgaria asked for bids for at least eight new or used fighter jets by October at a total cost of 1.8 billion lev ($1 billion). By end-2018, the government in Sofia plans to buy 1.5 billion lev worth of armored vehicles and two warships for 1 billion lev. Neighboring Hungary said in June that it had agreed to buy 20 Airbus H145M multi-purpose helicopters, the country's largest military purchase since 2001. NATO's European members are expected to spend around $60 billion on equipment this year, with the 13 eastern members accounting for about 10 percent, said Tony Lawrence, a research fellow with the International Center for Security and Defense in Tallinn. The newer members will together spend about $2 billion more on equipment this year than last, he said. According to NATO, seven of its 10 biggest spending increases will be in the east. “Since these nations' membership in NATO, there has been a clear inclination to foster and strengthen their link with the U.S.,” said Martin Lundmark, a researcher with Swedish Defense University in Stockholm. “By procuring strategic defense systems, they willingly become interdependent and inter-operable with the U.S.” https://www.bloomberg.com/news/articles/2018-08-13/nato-s-east-is-rearming-but-it-s-because-of-putin-not-trump

Rank Last Year's Rank Company Leadership Country 2017 Defense Revenue* (in millions) 2016 Defense Revenue* (in millions) % Defense Revenue Change 2017 Total Revenue* (in millions) Revenue From Defense 1 1 Lockheed Martin 1 Marillyn Hewson, Chairman, President and CEO U.S. $47,985.00 $43,468.00 10% $51,048.00 94% 2 4 Raytheon Company 1 Thomas Kennedy, Chairman and CEO U.S. $23,573.64 $22,384.17 5% $25,348.00 93% 3 3 BAE Systems Jerry DeMuro, President and CEO U.K. $22,380.04 $23,621.84 -5% $25,288.20 88% 4 5 Northrop Grumman 2 Wes Bush, Chairman and CEO U.S. $21,700.00 $20,200.00 7% $25,803.00 84% 5 2 Boeing 3 Dennis Muilenburg, President and CEO U.S. $20,561.00 $20,180.00 2% $94,005.00 22% 6 6 General Dynamics 4 Phebe Novakovic, Chairman and CEO U.S. $19,587.00 $19,696.00 -1% $30,973.00 63% 7 7 Airbus Thomas Enders, CEO Netherlands/France $11,185.91 $12,321.00 -9% $75,702.63 15% 8 11 Almaz-Antey 5 Yan Novikov, CEO Russia $9,125.02 $6,581.69 39% $9,125.02 100% 9 10 Thales Patrice Caine, Chairman and CEO France $8,926.13 $8,362.00 7% $17,852.26 50% 10 9 Leonardo Alessandro Profumo, CEO Italy $8,856.48 $8,526.22 4% $13,024.24 68% Full top 100: http://people.defensenews.com/top-100/

By: Martin Banks BRUSSELS — After two decades in which spending was often cut or stagnant, Europe is gearing up to spend big on defense. European Union nations, now unfettered by Britain's decision to leave the organization, have achieved a 70-year-old ambition to integrate their defenses, launching a pact among 25 EU governments to jointly fund, develop and deploy armed forces. The pact, called Permanent Structured Cooperation, or PESCO, is meant as a show of unity and a tangible step in EU integration, particularly after Brexit. Earlier this year, Brussels also launched a major incentive for EU member states to cooperate on military procurement with a European Defence Fund, or EDF, worth €5 billion (U.S. $5.8 billion) per year, the first time the EU has put serious money on the table for this purpose. The EU has already approved one aspect of the fund, the European Defence Industrial Development Programme, or EDIDP, intended to foster cross-border cooperation between companies. But this huge upsurge in EU defense efforts begs the question: Are these various initiatives doing anything to bolster Europe's defense industry? Full Article: https://www.defensenews.com/top-100/2018/08/09/eu-defense-ambitions-trickle-down-to-industry-but-is-it-good-for-business/

By: Aaron Mehta WASHINGTON — In the early days of the Pentagon's Defense Innovation Unit Experimental, then-Defense Secretary Ash Carter stressed that the “experimental” part of the unit was vital, a sign that the Silicon Valley outreach hub could remain flexible. “DIUx is, after all, an experiment, as well as a pathfinder,” Carter said in 2016, following a relaunch of the group after a frustrating first year. “We created it so we could try new approaches, learn what works and what doesn't, and iterate until we get it right. And we'll keep iterating together and learning from each other as we go forward.” Now, three years after its founding, it appears the experiment is over. Deputy Secretary of Defense Patrick Shanahan on Thursday announced that the office will now be known only as the Defense Innovation Unit, formally dropping the “experimental” part of the title. In a memo, Shanahan called the group a “proven, valuable asset” for the department and said the name change is a testament to my commitment to the importance of its mission.” “Removing ‘experimental' reflects DIU's permanence within the DoD. Though DIU will continue to experiment with new ways of delivering capability to the warfighter, the organization itself is no longer an experiment,” Shanahan wrote. “DIU remains vital to fostering innovation across the Department and transforming the way DoD builds a more lethal force.” It's a vote of confidence that will be welcomed by the now-DIU team and its supporters, after a year where many wondered about the future of the office. Since its creation, DIUx reported directly to the defense secretary — until February of this year, when it was rolled under the undersecretary of defense for research and engineering. Raj Shah, who led the group for the last two years, stepped down earlier this year as the office's leader; a search for his full-time replacement is ongoing. And three years after the office was formed, some have questioned what exactly the group has accomplished. Full article: https://www.defensenews.com/pentagon/2018/08/09/experiment-over-pentagons-tech-hub-gets-a-vote-of-confidence/

WASHINGTON -- Five university-industry teams have been selected for the Defense Enterprise Science Initiative, known as DESI, Defense Department officials announced today. DESI is a pilot program supporting university-industry research collaboration focused on accelerating the impact of basic research on defense capabilities. DESI's goals are twofold, officials said. First, it seeks to foster sustainable university-industry partnerships to identify and apply new discoveries and knowledge on existing capabilities and address technological gaps. DESI also aims to charter a new pathway to accelerate the transfer of basic research to innovative technologies and complement the department's other basic research programs such as the Vannevar Bush Faculty Fellowship, the Multidisciplinary University Research Initiative and the Defense University Research Instrumentation Program. “Programs like DESI are vital to foster collaboration in the research ecosystem and accelerate the transition of ground-breaking basic science to transformative capabilities,” said Dr. Bindu Nair, deputy director for basic research. “I look forward to seeing how these teams can help us address our unique and challenging defense problem sets.” Each team will receive up to $1.5 million over two years to further fundamental knowledge and understanding in the context of end-use applications. Full Article: https://www.defense.gov/News/Article/Article/1595382/dod-announces-desi-awards-for-university-industry-collaborations/

By: Jen Judson HUNTSVILLE, Ala. — Missile defense leaders within the Pentagon as well as Congress are pushing for more missile defense capability in space and the Missile Defense Agency Director Gen. Samuel Greaves laid out a rough idea of what a space-based missile defense sensor layercould look like. The missile defense community has been talking “seriously” about a sensor layer in space “actively over the last year,” Greaves said in an August 8 speech at the Space and Missile Defense Symposium. While many decisions still have to be made regarding requirements definitions, development paths and the acquisition process, “the key thing,” Greaves said, “is that there is serious consideration and support being given to the need to deploy these space sensors because we must do so.” Greaves laid out a very rough sketch of what the agency is looking for to build a robust sensor layer. First, the MDA might use something like a current system from the U.S. Air Force — the Overhead Persistent Infrared OPIR Global Scanning system — to alert and characterize activity in space, essentially “to be the bell ringer if something is going on,” Greaves said. Full Article: https://www.defensenews.com/digital-show-dailies/smd/2018/08/08/mda-director-provides-rough-sketch-of-possible-space-based-missile-defense-sensor-layer/

By: Andrew Chuter LONDON — Britain's defense exports recorded a massive 53 percent uptick in 2017, figures released by the government show. The Defence Security Organisation posted the figures, without any fanfare, on their website at the end of last month, showing British defense companies secured exports valued at £9 billion ($11.59 billion) last year; it's the second largest annual export success in the last decade. The defense sales figures bounced back from a poor performance in 2016 when associated exports totalled £5.9 billion. “The U.K.'s strong performance equates to a third-placed ranking globally, up from fourth in 2016, and is a considerable achievement,” said the DSO. The British success came against a background of a surge in defense exports globally. The DSO said total overseas sales by countries around the world reached a 10-year high at around $98 billion in 2017. Full Article: https://www.defensenews.com/global/europe/2018/08/08/uk-reports-massive-uptick-in-defense-exports/

By: Sebastian Sprenger COLOGNE, Germany – German authorities believe they are on firm legal footing to retaliate against cyber attacks by unleashing digital or conventional counterattacks, according to a series of recent written responses by government officials to lawmakers. The documents shed light on some of the legal considerations of cyber-warfare mulled in Berlin, just as the Bundeswehr moves toward full operational capability of a new command devoted to cyber operations. Some of the assertions outlined in a missive last month are surprisingly hawkish for a country reflexively averse to the use of military force. While acknowledging certain gray areas in responding to potentially crippling cyber attacks, officials also made clear that defending the country would afford the security services broad leeway under international law. “Just as in the land, air and naval domains, the Bundeswehr possesses 'active and reactive' capabilities that can be used for lawful operations,” Peter Tauber, the parliamentary deputy defense secretary, wrote to a collection of lawmakers from the opposition Green Party. So-called hack backs, or the retaliatory targeting of an attacker's information infrastructure, fall into that category, according to Tauber. As such, no new legal authorities for cyber defense would be required, he argued. At the same time, officials noted that such counterattacks would be permitted only as a counter-strike, not as an unprovoked act. Full Article: https://www.fifthdomain.com/global/europe/2018/08/07/german-cyberwarriors-assert-right-to-hack-back-when-attacked/