Northrop Wins Navy Contract – Analyst Blog

Northrop Grumman Corporation (NOC) was awarded a contract by the U.S. Navy for its Consolidated Afloat Networks and Enterprise Services (CANES) program. The company will streamline and update shipboard network systems to improve interoperability and affordability across the U.S. Navy’s fleet.

 

Northrop’s technology and services partner for the contract is Bethesda, Maryland based IBM Global Business Services, part of International Business Machines Corporation (IBM).

 

The CANES program is a $17.4 million indefinite-delivery/indefinite-quantity, cost-plus-incentive-fee, cost-plus-fixed-fee and firm-fixed-price contract. As per company estimates, if options are exercised by the U.S. Navy, the value of the contract could well be $775 million.

 

The CANES program office for the Northrop Grumman team will be located in San Diego. Work under the contract is expected to be completed in April 2011.

 

Northrop Grumman builds more ships, in more ship classes, than any other U.S. naval shipbuilder. In fiscal 2009, the company recorded $6.2 billion in shipbuilding revenues due to higher sales of Virginia-class Submarines, Expeditionary Warfare programs and Aircraft Carriers.

 

Northrop Grumman’s total order backlog at fiscal-end 2009 stood at $69.2 billion compared to $76.4 billion at fiscal-end 2008. The company bagged $32.3 billion of new orders during fiscal 2009. However, at the same time, it witnessed the cancellation of the $5.8 billion Kinetic Energy Interceptor program.

 

Northrop Grumman’s success in the competitive defense industry depends upon its ability to develop and market its defense-related products and services to the U.S. government, as well as its ability to provide people, technologies, facilities, equipment and financial capacity needed to deliver those products and services at peak efficiency.

 

The company competes with Force Protection Inc. (FRPT), General Dynamics Corporation (GD) and Boeing Company (BA).

 

Based in Los Angeles, California, Northrop Grumman provides products, services and solutions in information and services, aerospace, electronics and shipbuilding to the military, government and commercial customers of United States and beyond.

 

The company is the largest IT service provider to the federal government. We maintain our Neutral recommendation on the shares.