ITT Continues to Make Money Off of Legacy Radio but Defense Business Future Hazy
Defense contractors are able to make money off a great deal of different products and in different ways. They provide a variety of services and products that range from sweeping floors, to food and fuel, to developing and producing weapon systems as lowly as a truck to an advanced spy satellite as well as the conducting testing and research on advanced technologies. The defense budget is over $600 billion and provides many ways for a company to sell to the Government.
In a best case a contractor can make a product that the U.S. military will use for several years and require in large numbers. That is true for ITT Corporation (ITT) which since the late Eighties has been responsible for producing the standard tactical, VHF radio for the U.S. and many of its Allies. The Single Channel Ground and Airborne Radio System (SINCGARS) has been made in the tens of thousands and been put in pretty much every conceivable platform used by the U.S. This ranges from man portable systems to vehicles, ships and aircraft. The company has produced thousands of the radio for many different customers.
Since the late Nineties the U.S. has been working on a replacement, more advanced radio called the Joint Tactical Radio System (JTRS). The program has seen its ups and downs as it tries to develop a system that offers secure, broadband experience to the military. The JTRS radio will be programmable allowing it to change capabilities and bands without changing its hardware. This when it goes into use will be a significant enhancement over the SINCGARS and other radios. What this means for ITT is that they will no longer be the number one radio provider for the U.S. military as Boeing (BA), General Dynamics (GD) and other companies have been more involved in the JTRS program.
In fact in 2009 the U.S. announced that it was awarding the last production contract for the system and ITT has already begun restructuring its workforce. Unless they find an overseas market for the product or are able to get involved in JTRS production once that really ramps up the company will see one of its major product lines slowly go away as it is replaced by the newer, more advanced radio.
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