Plain Dealer April 21, 2002
Northrop eager to have TRW's technologies
By Peter Krouse, Plain Dealer Reporter
TRW Inc. doesn't make the big warships or nimble jets that make the television news when the United States gets in a fight. It's more of a co-star in the theater of war, providing electronic and communications systems, both in space and on earth, that help men and machines do battle.
And while Northrop Grumman Corp. does make warships, it covets TRW's supportive technologies. And it thinks the two firms should merge to stand a better chance at bidding for government contracts against established industry heavyweights Lockheed Martin Corp. and Boeing Corp.
"It would clearly solidify our position as a top tier contractor in defense and information technology areas," Northrop Grumman spokesman Randy Belote said.
Northrop Grumman's pitch to TRW shareholders - a $53 per share offer - is on the table and is likely to be the main topic among shareholders at TRW's annual meeting on Wednesday.
Northrop Grumman's desire for TRW extends to the vast array of scientists and engineers in Southern California and Northern Virginia working on so-called emerging technologies that will ensure the future defense of the United States.
Since the terror attack of Sept. 11, the call for a missile defense system and better battlefield communications, as well as higher defense spending in general, has grown louder. TRW's expertise in satellite systems, military electronics, high-powered lasers and information technology would all help accomplish those government goals.
TRW also makes auto parts, which account for more than 60 percent of its $16 billion in annual sales, but Northrop Grumman plans to unload the business if it acquires TRW.
Space is one frontier that TRW conquered early and continues to occupy. The company is expert at designing payloads, the guts of a satellite that provide either communications, imagery or eavesdropping capabilities.
TRW is now working with Lockheed Martin on the Advanced Extremely High Frequency satellite system, which will provide the next generation of secure communications for the military. The technology will, among other things, improve the ability for unmanned aerial vehicles, such as Northrop Grumman's Global Hawk, to transmit photos instantaneously to battlefield commanders who can then order more precise strikes on enemy positions, said Jim McAleese, a defense consultant in Northern Virginia working with Northrop Grumman.
The AEHF will be a vital component in the war against fast-moving terrorists, he said. "This capability to communicate on the battlefield in real time is just as important to protecting American lives in combat as are bullets and missiles."
TRW's space business also positions the company to play a major role in the development of a missile defense system. It was named prime contractor for the Space-Based Infrared System (SBIRS) Low project last week, which would include a constellation of low-orbit satellites to track ballistic missiles.
"TRW's been betting the company on it for the last decade," said John Pike, director of defense research firm GlobalSecurity.org. The contract for initial phase development totals $665 million.
Pike said the project had been restructured twice in the past five years and includes the difficult task of differentiating decoy missiles from those with actual warheads while they are cruising through space.
"It's an enormously difficult undertaking," Pike said.
SBIRS Low also would make early detection more easy.
"You will be able to detect the plume of a rocket being launched almost as it's being launched," said Marco Caceres, senior space analyst with Teal Group, a defense industry research firm in Northern Virginia. "It would be revolutionary."
TRW's laser technology also will play a role in missile defense. TRW and Lockheed Martin are assisting prime contractor Boeing on an airborne laser that would be mounted on a 747 jet and used to shoot down missiles so that they fall back into the country from which they were fired.
Meanwhile, TRW is the lead on the Tactical High Energy Laser (THEL) that would shoot at missiles from the ground. This work is under contract to the United States and Israel. TRW spokesman Jack Prichett said THEL has successfully shot down 25 Russian rockets in testing over the White Sands Missile Range in New Mexico.
Said Adam Friedman, a fund manager at National City Investment Management Co. in Cleveland. "(TRW has) an expertise in lasers that no on else has. And the lasers are going to be very useful as part of the missile defense program."
TRW's sphere of work also includes getting one defense component to communicate with another. The company, for instance, has provided the U.S. Army with hardware and software to improve battlefield communications. One of the programs is called Force 21 Battle Command Brigade and Below. It gives combatants a digital picture of the battlefield, including terrain, using blue icons to represent friendly troops and red icons to distinguish the enemy.
It gives "commanders a good view of the battlefield from their command vehicle," said John Dowdee, program manager of Force 21.
He said Force 21 is in "low-rate production" and that a variant of the program has been used in Bosnia.
"Some time next year we should get a contract to go into full-scale production," he said. "At that point in time it would be fielded to the whole army."
Northrop Grumman covets the many defense applications of TRW technology, but it also likes the non-defense information systems work the firm does, too. For instance, TRW managed the most recent U.S. census, developed the Internet document repository of the Securities & Exchange Commission and is creating a wireless communication system to be used by emergency personnel throughout Ohio.
There is a lot of opportunity for growth in such information technology, Northrop Grumman's Belote said, especially when coupled with a greater need to integrate government databases to help provide for homeland security.
While TRW specializes in such systems integration, it also experiments with specific technologies that could have a variety of uses.
In the area of microelectronics, it developed gallium arsenide microchips that made wireless phones more efficient. The company now has high hopes for the indium phosphide chips it's making.
"They've spent a lot of money on them, and now they're getting some breakthroughs," said Josh Peters, an analyst with Morningstar Inc. in Chicago.
Copyright 2002 The Plain Dealer. Used with permission
