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Lockheed Prevails Over Northrop in Bid to Build Surveillance Plane

August 03, 2004|Ronald D. White | Times Staff Writer

Defense giant Northrop Grumman Corp. lost its bid to start development and production of a new generation of military surveillance plane, the company said Monday.

Lockheed Martin Corp., the nation's biggest defense contractor, was selected over the team led by Century City-based Northrop to develop the joint Army-Navy project. Lockheed initially will receive as much as $879 million for development and production of the first five Aerial Common Sensor planes.

The aircraft is expected to provide battlefield intelligence, surveillance and reconnaissance. The program, which will develop a replacement for existing Army surveillance planes as well as the Navy's aging EP-3E aircraft, is valued at as much as $8 billion over two decades, according to industry sources.

Northrop executives said that the company hadn't done any large-scale hiring in anticipation of winning the contract. Most of the proposed work would have involved the company's Maryland-based electronic systems sector, Northrop spokesman Randy Belote said. Losing the bid will have little effect in California, he said.

"We would have ramped up if we had been successful with the contract, but we're still in excellent shape," Belote said. Northrop, with 27,000 employees in Southern California, makes the B-2 "Spirit" stealth bomber and a range of Navy warships.

The Army plans to buy as many as 38 Aerial Common Sensors and the Navy as many as 19, the Army said. Delivery of the first Army aircraft is expected in 2010 and the Navy version in 2012.

News of the contract came after the stock market closed. Northrop's stock, which rose $1.09 to $53.69 in regular New York Stock Exchange trading, fell 4 cents in after-hours trading.

Northrop is the nation's third-largest defense contractor, behind Lockheed Martin and Boeing Co.

On July 29, Northrop Grumman said its second-quarter profit rose 44%, mostly because of higher sales. The company also raised its earnings forecast for the rest of the year to between $2.90 and $3 a share, up from the previous range of $2.80 to $2.95.

Steven Binder, an analyst with Bear Stearns, said in a recent note to investors that Northrop Grumman was continuing to benefit from "better than expected sales growth."

Northrop Grumman's most recent big success came in December, when it and Raytheon Co. won a bid to develop so-called kinetic energy interceptors for anti-missile defense in a contract valued at more than $4 billion over eight years.

Reuters was used in compiling this report.

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