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Tiny planes' growing clout

A Monrovia firm's unmanned spy craft become vital reconnaissance tools on the battlefield

September 10, 2008|Peter Pae | Times Staff Writer

Standing amid a grove of pepper plants in Thousand Oaks last week, Christopher Thompson revved up his plane's tiny 6-inch propeller and then gently tossed it into the sky, much as weekend hobbyists fly their airborne toys.

But this mini-aircraft called the Raven, weighing little over 4 pounds and painted in Army gray, is no ordinary model.

It is actually a tiny U.S. military spy plane that can hover quietly 500 feet in the air and transmit video images to operators several miles away. These Simi Valley-made planes are providing vital information to ground combat soldiers in Iraq and Afghanistan who want to know what's happening over the ridge and around the bend.

"It served us well," said Thompson, a private first class with the Army National Guard, as he demonstrated how his unit used the Raven in Afghanistan. There the aircraft helped his platoon avoid enemy ambushes and pinpoint the location of insurgent mortar fires. "It's an essential part of what we do in the Army now," he said.

These unmanned planes have quickly become a mainstay of U.S. military operations and are helping propel the growth of a once-tiny company that until recently was better known for its gangly, pedal-powered planes.

The aircraft is not only popular at the Pentagon, but its manufacturer has caught the attention of investors.

AeroVironment Inc., the small company with headquarters in Monrovia, has recently become the darling of Wall Street, where investors have been driving up the stock price. The stock has risen more than 50% since March.

The shares have retreated in recent days along with the overall market. On Tuesday, the stock price fell 6.8%, but rose as much as 7% in after-hours trading because of a better-than-expected earnings report.

The Raven, with a wingspan of 4 1/2 feet, and the smaller 1-pound Wasp are fitted with cameras that transmit live-video images of what's ahead.

The planes, which are collapsible and fit in a rucksack or a backpack, are controlled on the ground by a soldier using a hand-held pad resembling a video-game controller and a laptop with video images of the plane's flight path. If a soldier loses control or sight of the plane, its onboard computer automatically takes over and flies itself back to where it was launched.

In June, the Pentagon awarded AeroVironment a contract potentially worth $200 million for the company's new larger Puma AE unmanned surveillance plane. That's on top of the $358-million contract the company won in 2005 to build more than 1,900 Raven aircraft.

"This is my favorite long-term stock pick," said Tim Quillin, defense analyst with Stephens Inc. He has a buy recommendation on the stock. "There are lots of companies that have made small unmanned aerial vehicles, but AeroVironment is now the sole provider for every small U.S. military surveillance program. It'll be hard to dislodge them."

On Tuesday, the company reported that quarterly profit surged 25% to $4.8 million as revenue rose 9% to $53.6 million on strong sales of unmanned vehicles. Funded backlog, or unfilled orders for which government funding has been approved, climbed to a record $108.9 million, up 32.8% from $82 million a year earlier.

"We continue to be excited about our future growth prospects," Timothy E. Conver, the company's chief executive, said during a conference call with analysts Tuesday.

With a surge in the military's demand for small unmanned planes, Conver said he was "comfortable" reiterating earlier projections of revenue growth of another 20% to 25% in fiscal 2009.

Investors are also intrigued by AeroVironment's nonmilitary projects. Although small at about 14% of revenues, this segment also has potential to grow sharply. The unit makes fast-charging equipment for electrically powered factory vehicles such as forklifts. The company is now looking at applying the technology to charging electric cars.

"The long-term outlook is very positive," said Michael Lewis, analyst with BB&T Capital Markets. "Looking out 12 to 35 months, there are opportunities out there that we haven't identified yet."

Indeed, at a research facility in Simi Valley, AeroVironment engineers are developing a tiny plane that can not only track down, identify and follow a target but then attack it like a missile.

Dubbed Switchblade, it would become the first unmanned vehicle with an explosive payload designed to kill an enemy combatant.

Also on the drawing board are tiny vehicles that just a few years ago would have seemed like science fiction.

Under a $2.3-million Pentagon research grant, the company is developing an aircraft with flapping 3-inch wings that could fly indoors. It would weigh less than half an ounce, or about the size of a large hummingbird.

In a separate $4.6-million grant, the company is developing a 1-pound aircraft that could fly quietly to a location, perch itself there and then relay back to base live video images of what's happening.

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