CBS.MarketWatch.com September 17, 2002
Defense sector fades after Iraq cools
By August Cole
NEW YORK (CBS.MW) -- Military contractors and aerospace firms traded lower Tuesday as the near-term likelihood of a U.S. military campaign to unseat Saddam Hussein was pushed back by Iraq's decision to allow the return of U.N. weapons inspectors.
The Amex Defense Index (DFI) fell 2.9 percent and the Philadelphia Defense Index (DFX) gave up 2.5 percent.
Shares of Lockheed Martin (LMT), the world's biggest defense contractor, lost $1.30 to $64.45.
Boeing (BA) fell 43 cents to $36.81 after a strong run Monday that followed a new contract with its largest union.
Northrop Grumman (NOC) and TRW (TRW) both succumbed to selling as the soon-to-be merged pair filed the latest round of papers with the Department of Justice and the European Commission.
Raytheon (RTN) gave up $2.18 to $34.71.
Dow-listed Honeywell (HON) also declined as did United Technologies (UTX).
CIBC World Markets analyst Steve Murphy estimated the $50 billion defense and security IT market could be worth $77 billion by fiscal year 2006, according to the firm's morning research report. He points out that government agencies have little choice but to upgrade when it comes to information technology systems because of unconventional, or asymmetric, threats.
Still, L-3 Communications (LLL) gave up $3.03 to $54.47 and Integrated Defense Technologies (IDE) lost $2.16 to $24.80. L-3 said Tuesday it will get about $114 million from the Transportation Security Administration to finish up a deal to provide 425 bomb detection systems to be used in airports.
UDI (UDI) lost 67 cents to $22.83.
Ordnance and rocketry specialist ATK (ATK) gave up $3.43 to $70.27.
Inspectors' impact
Though the likelihood of an attack on Iraq remains up in the air, the timing of such a campaign is no less important.
John Pike, of GlobalSecurity.org, pointed out that the window of opportunity for ground operations in Iraq shuts in February as the desert heats up. Hussein may be angling, he said, to keep the U.S. at bay through that period of time.
"I think that it is certainly going to make things more complex," said Pike of the likely return of inspectors. Iraq's definition of unconditional access for the inspectors, however, will determine how far the debate shifts from one of attack to containment.
The White House, for its part, has been strongly skeptical of Hussein's offer.
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