The defense industry may be adjusting to a new age of financial austerity

By John Keller
Posted by John Keller

I've noticed a few things about the financial shape of the aerospace and defense industry over the past month or two. It seems that company mergers and acquisitions are tailing off, while the number of contracts and procurement opportunities are headed up.

Now by no means is this observation about the health of the aerospace and defense industry based on any scientific analysis. Instead, it's more of a gut feel, and as such has all of my biases and wishful thinking folded into it.

Still, my gut feel largely is based on the past month's news coverage in Military & Aerospace Electronics. We've had a lot of stories covering contract wins and procurement opportunities, and not many covering mergers and acquisitions. Have we overly concentrated on contracts and opportunities lately, to the exclusion of mergers and acquisitions?

Perhaps, but let's stipulate for a moment that our industry actually has had fewer mergers and acquisitions lately, and more contracts and opportunities than we've had in a while. How might this bode for the future -- especially for an industry that's taking it on the chin in the Pentagon's 2013 budget request?



Well, to start with, this feels like a port in the storm for an industry that has been jittery for more than a year about future prospects for defense spending. Maybe ... just maybe, our industry has hit bottom and is on the way back up. Perhaps this is an early indication that the aerospace and defense industry is starting to adjust to a new era of financial austerity.

Our industry, for good or ill, is digesting the notion that a long streak of healthy Pentagon budgets might be at an end -- perhaps for quite a while. This means competition is ratcheting up, in government and in industry.

For those in government, it looks like they have to make do with less, in measurable terms. Not only does this mean the Pentagon can no longer fund many of the things its leaders want, but also must face the inevitable challenge of deciding what projects to keep, and which to abandon.

For those in industry, it means they have to work harder than they have in a long time to prevail over their competitors for military contract wins. Price, as always, will be a driving force, but as dollars dry up, military officials will look harder at capability and quality than they have in a long time.

For industry and government together, everyone will be in the hunt for breakthrough technologies that bring serious new capabilities to the table at reasonable costs.

None of that will be easy. Still, on those rare occasions when it happens, we'll know who the real heroes are.

Easily post a comment below using your Linkedin, Twitter, Google or Facebook account.

Previous Blog Posts

Capital Hill budget deal could restore tens of billions of dollars to the Pentagon

December 17, 2013

Hacker drone story a cautionary tale about the need for unmanned vehicle data security

December 10, 2013

Lack of money for systems upgrades threatens to maintain wind-farm radar dead spots

December 3, 2013

Engineering support contracts indicate the Pentagon is sinking into the Mothball Strategy

November 26, 2013

The revenge of COTS: an ageing commercial technology base complicates military supply chain

November 19, 2013

Navy's newest destroyers evolve to fill traditional battleship roles

November 12, 2013

International suspicions of U.S. encryption technology putting defense companies in a bind

November 5, 2013

Defense industry left guessing as Army struggles forward with an unclear mission

October 29, 2013

These are tough times for the combat vehicle and vetronics industries

October 22, 2013

Is the government shutdown a harbinger of more ominous things to come?

October 15, 2013

Government shutdown reduces military contracting, increasing pressure on U.S. defense industry

October 7, 2013

Potential good news: has U.S. defense spending finally bottomed-out?

October 1, 2013

Is robotics revolution the first glimpse of a fundamental change in human evolution?

September 24, 2013

Obsolescent parts: are we enhancing military readiness or creating a hollow force?

September 17, 2013

For the high-tech warfighter, the future of electronics-laden uniforms is here

September 10, 2013

New generation of embedded computing thermal management in development at GE

September 3, 2013

Trading bus stops for credit cards: how far embedded computing has come in three decades

August 27, 2013

Unmanned vehicle industry stands at the doorstep of a fundamental transformation

August 20, 2013

AUVSI 2013, one of the biggest unmanned vehicles shows in the world, opens this week in Washington

August 13, 2013

The Washington Post, under Jeff Bezos, could lead the way for media in the 21st Century

August 6, 2013

Are costs and vulnerabilities making military leaders nervous about satellite communications?

July 30, 2013

Unmanned aircraft carrier that travels beneath the waves may be in the Navy's future

July 23, 2013

Electronic warfare programs kick into high gear with a flurry of contract activity

July 16, 2013

How vulnerable are U.S. Navy vessels to advanced anti-ship cruise missiles?

July 9, 2013

First came VHSIC, then came MIMIC, and now comes ACE to push electronics technology

July 2, 2013

The Mil & Aero Bloggers

John Keller is editor-in-chief of Military & Aerospace Electronics magazine, which provides extensive coverage and analysis of enabling electronic and optoelectronic technologies in military, space, and commercial aviation applications. A member of the Military & Aerospace Electronics staff since the magazine's founding in 1989, Mr. Keller took over as chief editor in 1995.

Ernesto Burden is the publisher of PennWell’s Aerospace & Defense Media Group, including Military & Aerospace Electronics, Avionics Intelligence and Avionics Europe.  He’s a father of four, a runner, and an avid digital media enthusiast with a deep background in the intersection of media publishing, digital technology, and social media. He can be reached at ernestob@pennwell.com and on Twitter @aero_ernesto.

Courtney E. Howard, as executive editor, enjoys writing about all things electronics and avionics in PennWell’s burgeoning Aerospace and Defense Group, which encompasses Military & Aerospace Electronics, Avionics Intelligence, the Avionics Europe conference, and much more. She’s also a self-proclaimed social-media maven, mil-aero nerd, and avid avionics geek. Connect with Courtney at Courtney@Pennwell.com, @coho on Twitter, and on LinkedIn.

Mil & Aero Magazine

December 2013
Volume 24, Issue 12
file

All Access Sponsors


Download Our Apps



iPhone

iPad

Android

Connect with Us



Newsletters

Military & Aerospace Electronics

Weekly newsletter covering technical content, breaking news and product information
SUBSCRIBE

Defense Executive

Monthly newsletter covering business news and strategic insights for executive managers
SUBSCRIBE

Embedded Computing Report

Monthly newsletter covering news on embedded computing in aerospace, defense and industrial-rugged applications
SUBSCRIBE

Unmanned Vehicles

Monthly newsletter covering news updates for designers of unmanned vehicles
SUBSCRIBE