TrendDefense contractors look to cybersecurity for growth
The Obama administration’s emphasis on cybersecurity in its FY2010 defense budget — and the federal budget more generally — offers opportunities for large defense contractors; smaller companies providing gear for Afghanistan/Pakistan war also see growth opportunities
The big news about the U.S. FY2010 defense budget is not its size — it will grow 4 percent relative to the 2009 budget — but its composition: there will be much greater emphasis on cybersecurity (similar to such emphasis in the federal budget as a whole). Investorsideas.com’s Lisa Springer writes that many defense contractors are thus looking for growth opportunities in the market for cyber security. Bruce Tanner, the CFO of Lockheed Martin, recently identified cyber security as the quickest, near-term defense opportunity, with market growth well exceeding DoD growth rates. Tanner also believes cyber security margins will be comparable to DoD contracts. Lockheed has begun focusing M&A activity in the global security area and anticipates additional cyber security acquisitions this year.
Both Boeing and Lockheed Martin are eager to gain share in this $7.4 billion market and have formed business units to tap cyber security spending. Boeing created its Cyber Solutions division last August and Lockheed launched its cyber-defense unit last October.
Springer writes that to address cyber security opportunities, Raytheon has acquired three network security providers, plans to hire 300 certified security engineers this year, and is partnering with University of Texas researchers on new cyber solutions. Northrop Grumman is also expanding cyber security capacity and was recently awarded a DoD contract for the National Cyber Range, part of a major government-wide effort to improve the nation’s defense against electronic attacks.
The need for a national cyber security plan is becoming increasingly evident as cyber attacks on U.S. agencies and civilian facilities cost the U.S. billions of dollars annually. Springer writes that the problem is getting worse. Security breaches of U.S. government and private computer networks nearly doubled last year to 72,000. In response, the government is increasing spending for cyber security, which is forecast to rise by 44 percent to $10.7 billion in 2013. The Bush administration launched a cyber initiative last year funded at around $6 billion and the Obama administration is making cyber security an even higher priority.
President Obama earmarked $355 billion for cyber security in his 2010 fiscal budget and also announced plans to name a cyber security czar. Last month the White House published a cyber security report with guidelines for strategies ranging from communications networks for emergency response teams to the government’s role in protecting infrastructure. The report followed a 60-day review of current government cyber security initiatives and was ordered by Obama shortly after he took office.
Springer writes
