IRAQ: L-3 Snaps Up $426-million Army Intel Work

L-3 Communications has landed a contract with the U.S. Army to provide "intelligence support services in Iraq" worth up to $426 million, another sign that the eight-year-old defense contractor could be on the road to one day rivaling industry heavyweight
Publisher Name: 
Red Herring
L-3 Communications has landed a contract with the U.S. Army to provide "intelligence support services in Iraq" worth up to $426 million, another sign that the eight-year-old defense contractor could be on the road to one day rivaling industry heavyweights like Boeing and Lockheed Martin.
 
The new Army contract, announced Friday, is the first large award to New York City-based L-3 since the company said in June it was paying $2.65 billion to acquire Titan, a defense contractor based in San Diego. Like L-3, Titan sells the U.S. government communication and information technology. It's also a chief provider of translators and linguists to the U.S. Department of Defense.  

L-3 Chairman and CEO Frank Lanza has said he wants the company he co-founded in 1997 to be the No. 1 "mezzanine level" Pentagon contractor.
 
The top five Pentagon contractors like Boeing and Lockheed Martin consume two out of every three Pentagon dollars. With a budget of around $416 billion in 2005, that still leaves plenty of money left over.
 
L-3's steady acquisition of smaller companies, and its specialty in secure communications, one of the Pentagon's highest growth areas, may have nudged the firm out of the mezzanine.
 
While the new contract, to deliver intelligence services in Iraq through 2009, is not the largest L-3 has won, it is further evidence that the company might be growing beyond its original ambition.
 
Peter Arment, an analyst with JSA Research, said the latest Army deal is proof the firm is well-positioned to reap profits from the global war on terror's high-tech future.
 
"They not only have growth opportunities with the rising defense budget, but in homeland security," he said.
 
In addition to secure communications, L-3 does considerable work in intelligence, surveillance, and reconnaissance, known in defense circles as ISR. As the U.S. military continues its drive toward so-called net-centric warfare, L-3's secure communications business stands to benefit.
 
In 2004, L-3 posted sales of $6.9 billion, up from $5 billion in 2003. Titan had sales of $2 billion in 2004 compared to $1.7 billion the year before.
 
Once L-3's acquisition of Titan is complete, the company will have revenues of $11.5 billion in 2006, said Mr. Arment. 
 
In 2004, L-3 was the 11th-largest Pentagon contractor. Titan ranked 29th.
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