Bloomberg September 13, 2004
General Dynamics, Lockheed to Split $12 Bln Network
By Edmond Lococo and Tony Capaccio
Sept. 14 (Bloomberg) -- General Dynamics Corp. and Lockheed Martin Corp. will stop competing and instead work together on a $12 billion program to design a communications network for the U.S. Army under a plan to speed development.
Defense Department Acting Undersecretary for Acquisition Michael Wynne approved the Army's plan on Friday, Pentagon spokeswoman Cheryl Irwin said in an e-mailed statement.
The Warfighter Information Network-Tactical, or WIN-T, will be a high-speed communications network linking commanders at the Pentagon to troops in the field. A variety of new systems will plug into the network, from the $92 billion Future Combat Systems family of armored vehicles being developed by Boeing Co. to the $5.8 billion Joint Tactical Radio System being developed by Lockheed, Boeing, General Dynamics and other companies.
``This is an enormously critical program because it's the backbone for the rest of the Army's modernization,'' said John Pike, an analyst at defense research group Globalsecurity.org. ``Until you get going on WIN-T, it's pretty hard to get down the road with the rest of it.''
Bethesda, Maryland-based Lockheed and Falls Church, Virginia- based General Dynamics had been developing competing designs for the network under three-year contracts, and the Army had been expected to select one company for final development next year.
Network Architecture
Under the new arrangement, General Dynamics will lead the team and Lockheed will be the ``major subcontractor'' responsible for about 50 percent of the work, the Army and General Dynamics said in separate statements.
The combined effort will allow the Army to settle the network architecture within the next four months, the Army statement said, quoting Colonel Angel Colon, the network's project manager.
``Soldiers will benefit from this combined effort because it opens the door for the latest in information technology to be fielded where real-time, quality information is most highly valued- - with our deployed and combat-ready units,'' Colon said.
General Dynamics is ``very pleased'' to be working with Lockheed on the network, Mark Fried, president of General Dynamics C4 Systems unit said in a statement. Lockheed spokesman Matt Kramer declined to comment.
General Dynamics gave the program's expected value through 2018 as $7 billion. The Pentagon put the program's expected cost at $12.4 billion in its latest quarterly costs report.
Complementary Strengths
The combined team made sense for the Army because General Dynamics and Lockheed had complementary strengths, said SG Cowen & Co. analyst Cai Von Rumohr. He doesn't assign a rating to companies he follows, and doesn't own the shares.
General Dynamics, the largest supplier of communication equipment to the Army, has expertise in radios, while Lockheed has more experience in integrating networks, Von Rumohr said.
``The skill sets they brought to the table are different,'' Von Rumohr said. ``That may have been an advantage to the customer.''
Splitting the work between the two is also positive for each company, he said.
``They both got business,'' Von Rumohr said.
Lockheed is the largest U.S. defense contractor, Chicago-based Boeing is No. 2 and General Dynamics ranks fourth behind Northrop Grumman Corp., based in Los Angeles.
Shares of Lockheed rose 7 cents to $53.99 in New York Stock Exchange composite trading. General Dynamics rose 1 cent to $97.45.
© Copyright 2004, Bloomberg L.P.
