The Boeing Company (BA), Raytheon Company (RTN): How Lockheed Martin Corporation (LMT) Aims to Lock Up the Market for Army Helicopters

Page 1 of 2
In ancient times, skillful warriors first made themselves invincible, and then watched for vulnerability in their opponents … skillful warriors are able to be invincible, but they cannot cause opponents to be vulnerable.

Sun Tzu, The Art of War

Well, with Pentagon Sequester now in full swing, defense execs are starting to feel “vulnerable.” For most of July, and on into August, we’ve seen below-average issuances of new contracts to the nation’s leading defense contractors. Last week, only $1.5 billion in contracts went out — about 76% below the level you’d ordinarily expect in this budget year. Clearly, money is getting tight.

Yet long-term investors know there are ways to grow profits even in a shrinking market. Because even in a shrinking market, you can still shore up your share of the market … and sometimes even take market share from others.

And that’s what Lockheed Martin Corporation (NYSE:LMT) intends to do.

A few years ago, Lockheed Martin Corporation (NYSE:LMT) locked up the market for military warplanes, winning the contract to build F-35 fighter jets for the U.S. Air Force, Navy, and Marine Corps — a $1 trillion dollar opportunity, and maybe more. According to some experts, this might be the last manned fighter jet the U.S. ever builds. And yet, although Lockheed Martin Corporation (NYSE:LMT) appears to have cornered this market, its ambition doesn’t stop here.

Last week, in a development that got little attention from the mainstream media, Lockheed Martin Corporation (NYSE:LMT) announced a new initiative to help do for helicopters what it did with the F-35 for fighter jets — to “offer a universal, highly adaptable and affordable mission equipment package (MEP) to meet requirements for the Joint Multi-Role/Future Vertical Lift (JMR/FVL) rotary wing program.” With the U.S. Army expected to buy some 4,000 such next-gen helicopters eventually, this is already a pretty big deal. But it could be even bigger than it sounds.

According to Lockheed Martin Corporation (NYSE:LMT), MEP will be “a highly adaptable package” including “advanced avionics, sensors and weapons … that can be applied across multiple platforms.” To me, this sounds like Lockheed is trying to develop a package that can be installed on multiple helicopter systems — to the exclusion of competing defense contractors’ systems.

As Lockheed tells it, of course, its primary aim is to make military helicopters more “affordable” for its customers. But a side benefit for Lockheed — completely unintentional, I’m sure — is that a customer that chooses to install its MEP package of “avionics, sensors, and weapons” would most likely be unable to swap out one part of the integrated package for an offering from a rival contractor.

What it means to you
So what does this mean in practice? To start with an easy example, Lockheed has been putting TADS/PNVS electro-optical fire control systems in The Boeing Company (NYSE:BA) Apache helicopters since 1983. Every time a helicopter contract comes up for bid, though, Lockheed Martin Corporation (NYSE:LMT) has to fight for the right to make sure TADS/PNVS gets installed in it rather than, say, Raytheon Company (NYSE:RTN)‘s Multi-Spectral Targeting System, a standard on Sikorsky Seahawks.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

5 Best States for Golf Adventures

Top 15 Places To Visit Before You Die

10 Most Expensive Smartphones in the World

10 States with Lowest Physician Density

10 Top Reasons For Getting Fired

The 3 Best States to Start an LLC

10 Jobs That Allow You to Travel

7 High-Paying Jobs You Can Do From Home

12 Best Cities to Shop in USA

10 Best States To Practice Medicine

The 10 Best States to Have a Business

The 12 Most Expensive Apple (AAPL) Apps in the Market

The 10 Richest Billionaires in the World

10 Biggest Kickstarter Failures

The 10 Best Places to Work At

The Top 10 of Google Inc (GOOGL)’s Most Expensive Acquisitions

13 Best Cities to Visit in South America

10 Most Expensive Works of Art of All Time

The 10 Richest Banks in the World

The 10 Best-Paying Jobs in America (2014)

7 Most Expensive Foods in the World

The World’s Top 10 Earning Authors

Five Wicked and Very Expensive Items (and Other “Stuff”) Sold on eBay

10 Biggest Celebrity Bankruptcies

The Top 10 Highest Paid CEOs in 2014

The 10 Most Expensive Real Estate Cities in America

10 Most Expensive States To Live In America

The 10 Best Airlines in the World

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!