The proposed acquisition of TRW Corp. would bring Northrop Grumman Corp. one step closer to creating a network of weapons and electronic systems across all three military services, a feat that is at the crux of the Bush administration's push to transform the Pentagon.
With TRW, which agreed Monday to be acquired for $7.8 billion, Northrop would have interests in virtually every sector of the defense industry, offering everything from ships to satellites to lasers to aircraft to computer networks.
The breath of its businesses essentially would give Northrop elite status among contractors able to provide "system of systems" integration--a complex and lucrative task to oversee multibillion-dollar defense contracts.
Beyond strengthening Century City-based Northrop's position in the defense industry, the TRW acquisition also would make it the leading supplier of computer network services to the federal government.
The combination of Northrop's and TRW's information technology businesses would propel the combined company past Lockheed Martin Corp. as the nation's largest provider of computer network systems for the U.S. government.
TRW Systems, based in Reston, Va., generates about $2 billion in annual revenue and recently won a five-year, $650-million contract to provide computer stations and supply management software to the Air Force and the Pentagon. It developed and currently maintains the database system for the Securities and Exchange Commission and is helping to modernize the computer system for the Internal Revenue Service.
Through its acquisitions of Logicon, PRC and now Cleveland-based TRW, Northrop would maintain many of the government's computer systems, including the Web site for the White House and the networks for the nation's most secret agencies, such as the National Reconnaissance Organization.
But Northrop's acquisition strategy in the last decade has aimed at giving it a bigger role in defense, particularly in developing systems that could be "inter-operable" among the military services. The Air Force, Navy, Marine Corps and Army currently design and develop weapons and communications systems separately.
Lockheed and Boeing Co., the nation's two largest defense contractors, also have a wide range of products, but they are focused mainly toward meeting the needs of a particular military service, said Richard Aboulafia, a defense analyst for Teal Group.
