Editor’s Note: Related tickers: Google Inc (NASDAQ:GOOG), Raytheon Company (NYSE:RTN), Lockheed Martin Corporation (NYSE:LMT), L-3 Communications Holdings, Inc. (NYSE:LLL), General Electric Company (NYSE:GE), The Boeing Company (NYSE:BA)
Are you excited about Google Inc (NASDAQ:GOOG)’s Glass concept—learn more here—eventually making its way to the market? Is this wearable device something you are hoping to get your hands on as son as you are able to do so? Like many, you may be dreaming of the day when you can put this technology to good use.
Similarities
With all this in mind, you may be surprise to find that Google Inc (NASDAQ:GOOG) is not exactly the first company to the punch. While Glass is unique in many ways, according to a recent Bloomberg Video, “the next trend in military tech looks a lot like Google Glass.”
Does this mean Google Glass could make it ways to a battlefield in some part of the world in the near future? While this has not been ruled out, it is important to note that many soldiers are already using similar technology.
For a better idea of what is available to the military right now, let’s take a closer look at what the video segment had to say:
“The airman looks out, he says an enemy camp that is partially marked. He can look at that, press a button on his wrist display, mark that target, which captures the coordinates of that target, that he can pass on to aircraft to eliminate it.”
Todd Lovell is the guy giving us all the information in this video. As the technology director for Raytheon Company (NYSE:RTN), he knows a thing or two about this type of technology and how it is being used by the United States Military.
He added the following while displaying some of the coolest technology you will ever see, as well as something that is quite similar to Google Glass:
“On his head you will see the helmet mounted display of the information of what is going on around him. On his wrist is a display controller that can display things like we are demonstrating here, like a moving map…”
Glass release
Google Inc (NASDAQ:GOOG)’s Glass eyewear is expected to be released in the fourth quarter of this year, and according to a research report from Forrester, 12% of the U.S. population is ready to get the device on their collective faces. While it’s estimated that a pair of Google glasses will cost between $300 and $500, defense contractors are working on wearable devices that are likely to be far more costly.
AWARE
Raytheon Company (NYSE:RTN) is developing the JTAC system, which stands for Joint Tactical Air Controller. Based on information from this walkthrough, Raytheon’s device will feature an ocular input over one of a soldier’s eyes, allowing the user to “separate friendlies from enemies and relay the information to strike forces,” and a wrist-based control system. The simplicity that these two contact points (the wrist and the eyes) provide is intriguing, and begs the question if Google Inc (NASDAQ:GOOG) will eventually pair a wristwatch with its Glass devices.
Raytheon Company (NYSE:RTN)’s broader design is to implement a program so aptly called AWARE, which includes multi-target HUDs in helmets of F-16 pilots, for example. Specific price points and revenue projections for the AWARE program have not been released. Raytheon VP John D. Harris has gone on record to say, “With our AWARE product line, our customers are able to cost-effectively upgrade and significantly increase the situational awareness capabilities of their existing platforms,” with the key word being upgrade.
A few other players
It’s worth mentioning that Raytheon Company (NYSE:RTN) isn’t the only player in the defense industry’s budding smart display space. A U.S. Army contracting command has shed light on the fact that the federal government is “seeking sources to provide a smart display unit for a ground combat vehicle” by 2016, and both Lockheed Martin Corporation (NYSE:LMT) and L-3 Communications Holdings, Inc. (NYSE:LLL) have a hand in this arena as well.
Lockheed has already upgraded its modernized Aegis Cruisers—those built by Aydin Displays—in addition to its F-16 upgrades, for those models with systems built by General Electric Company (NYSE:GE). GE also has smart displays in Raytheon’s T-6A JPAT, while L-3 Communications Holdings, Inc. (NYSE:LLL) is involved with The Boeing Company (NYSE:BA)’s CH-46E Sea Knight models.
Final thoughts
At 16 times forward earnings and a PEG of 1.7, Google Inc (NASDAQ:GOOG)’s fair valuation allows many investors to make the speculative bet that its wearable technology will have a significant effect on the company’s bottom line; most projections expect less than 250,000 units to be sold each quarter within the next three years.
Raytheon Company (NYSE:RTN)’s AWARE initiative has the potential to impact its bottom line in an equally as meaningful way, and at 11 times forward earnings and a sales multiple below parity, there’s also value here. The sell-side expects the defense company to generate earnings growth of 6-7% annually over the next five years, above what’s forecasted for L-3 Communications Holdings, Inc. (NYSE:LLL) (1.6% annual growth).
L-3’s valuation, which is similar to Raytheon, decidedly makes the latter a smarter buy, and we’ll be watching JTAC system updates closely.
Lockheed Martin Corporation (NYSE:LMT), meanwhile, trades at about a 20% discount—on a PEG basis—in comparison to Raytheon Company (NYSE:RTN), and Wall Street analysts expect its annual EPS growth to outpace Raytheon by about 0.5-1% through 2017; this looks like an equally attractive play.
It’s important to remember that we don’t know company-generated sales projections for these defense contractors’ smart display systems in development at the moment—and Google Inc (NASDAQ:GOOG) for that matter—but a long-term investor wanting exposure to the wearable device market can’t forget about the U.S. Military. For another strategy worth paying attention to, continue reading Insider Monkey here.
Disclosure: none
