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Lockheed Martin Corp. the largest U.S. defense contractor, won an order to develop and build a new common missile for the Army, Navy and Marine Corps, a program the company estimates could be worth as much as $5.5 billion over 20 years.
Lockheed beat Boeing Co. and Raytheon Co. in the competition initially worth as much as $1.6 billion to develop the Joint Common Missile. The order also covers the first two production batches, or as many as 2,700 of 55,000 missiles, the Army said in a statement.
``This is the first of several large U.S. program competitions scheduled to be announced over the next two months, and these announcements could have positive trading implications for the defense group as a whole,'' J.P. Morgan analyst Joseph Nadol wrote in a report.
The U.S. military wants to cut costs by fielding a common missile. The new 70-inch missiles would be launched from Army helicopters, Navy fighters and unmanned spy planes, and would replace Raytheon's Maverick and Lockheed's Hellfire missiles. Unlike the old missiles, the new ones won't have to be guided by pilots to their targets after launch.
The win is the biggest for Lockheed since Dec. 9, when it beat rivals Northrop Grumman Corp. and Raytheon for a contract worth as much as $4.6 billion to develop and manage targets and decoys used to test missile-defense systems. Raytheon is the world's largest missile maker.
``This is a big program that will last a long time,'' said John Pike, an analyst at defense research group Globalsecurity.org. ``It certainly deprives Raytheon of one segment of the business they have been in since the shooting stopped in Korea half a century ago.''
Boeing, the second-largest U.S. defense contractor, did not immediately return a phone call seeking comment.
More to Come
The Joint Common Missile program is the first of seven multibillion-dollar defense contracts over the next seven months on which Lockheed is competing. J.P. Morgan's Nadol has said the company stands a good chance of winning at least three, which would lift profit this year beyond the company's forecast of $2.60 a share, up from net income of $2.34 a share in 2003.
Later this month, the Navy will select two teams between Raytheon, Lockheed Martin and General Dynamics Corp. to proceed into major development and later production of the new Littoral Combat Ship class of small warships.
``We're very disappointed'' at not winning the missile contract, Raytheon spokeswoman Barbara Starr said. ``We believe our proposal provided the lowest risk and lowest cost.''
There is the possibility that Raytheon could do subcontracting work for Lockheed on the program, she said. The loss won't result in job cuts because of work needed to upgrade the company's Maverick missiles, she said.
The new missile will be able to detect and destroy tanks, bunkers, moving targets, vessels and sections of buildings. It could be launched from the Army's AH-64 Apache and Special Forces AH-6 Little Bird assault helicopter, the Navy's F/A-18E/F Super Hornet fighter and the U.K.'s Kingdom AV-8 Harrier II Plus aircraft. It also may later be installed on the ground vehicles of the Army's new Future Combat System.
Lockheed Martin Missiles and Fire Control will handle almost 60 percent of the work at its facility in Troy, Alabama, and the remainder in Orlando, Florida, the statement said. Teammates EDO Corp. will provide the launchers and General Dynamics Corp. will make the warhead. Roxel UK Rocket Motors Ltd. of the U.K. and GenCorp's Inc.'s Aerojet unit are building the missile motors.
Lockheed today received the first $53 million toward the contract, the Army said in its statement. Lockheed's missiles unit had $3.24 billion of sales last year, or about 10 percent of the company's total sales of $31.8 billion.
The program calls for the missiles to be developed through fiscal 2008, with initial production to begin in 2009. A full- production decision will come in 2010. The current Army budget calls for spending about $700 million on the program through 2009.
Lockheed's shares rose 43 cents to $48.30 in New York Stock Exchange composite trading. Raytheon shares rose 24 cents to $32.25 and Boeing rose 48 cents to $43.76. The military's decision was announced after the close of regular trading.