Lockheed wants industry partners to help connect people & platforms

Lockheed Martin sees its vision of a more connected military enterprise as requiring the help of partners in the defense industry and other industries, such as the sector Lockheed's own CEO came from.

Lockheed Martin’s vision and road map of connecting people, platforms and systems into a single networking architecture certainly has the company’s own offerings in mind.

But the world’s largest defense company is also mindful of helping the U.S. military avoid being locked into a single provider of the technologies that are shaping Lockheed’s own “21st Century Warfare” concept that corresponds with “5G.mil.”

During Lockheed’s second quarter earnings call Monday, CEO Jim Taiclet told investors the end game is to eventually build out the network effect across all the platforms out in the field.

The company is building an internal road map for how its own products and platforms fit into the larger vision given it has more control over the trials, demonstration and production aspects.

“At the same time, we're open to collaborating with our industry partners that are traditional in defense and aerospace and eagerly and already successfully with some of my old counterparts and my former counterparts in telecom and tech where we're trying to build out the Internet of Things network of the future here,” Taiclet said to analysts.

Lockheed has already taken one public step in that direction through its partnership with Omnispace announced in March to build out a space-based 5G global network with the ability to let users switch between satellite and terrestrial connectivity.

The bigger picture idea at Lockheed is to take an approach based on open architecture, a concept Taiclet knows well given his tenure as CEO of American Tower Corp. That company owns and operates wireless communications infrastructure as a real estate investment trust.

As Taiclet pointed out, the telecommunications and technology industries became what they are because open architecture was the baseline for building up those networks.

One internal example Taiclet brought up during the call saw the company demonstrate an open radio architecture in a U-2 aircraft “as basically a cell tower in the sky connecting F-35 and F-22 data lengths” back to the first platform.

“We could add an F-18 or another aircraft, even an allied aircraft, a Eurofighter, for example, down the road,” Taiclet said.

He also brought up the obvious example of how the F-35 fighter jet would figure into the broader network of people, platforms and systems.

Taiclet said the F-35 becomes a “much more valuable platform when you take advantage of the network effect that it can deliver by connecting sensors across domains, adding 5G.mil capability to our (communications) system so that we can communicate with satellites directly. You end up getting a whole network effect with the value to the defense enterprise and the deterrent value is going to go up by implementing this across our technology road map over the next number of years.”

Creating that network effect and bringing partners into the fold are key pieces in Lockheed’s push for mid-single-digit revenue growth over the next five years. Lockheed is holding to its outlook for this year of $67.3 billion-to-$68.7 billion in revenue and $7.38 billion-to-$7.52 billion in operating profit.

Second quarter revenue of $17 billion was roughly 5-percent higher over the same period last year, while net earnings of $1.8 billion included a $225 million loss on a classified program in the aeronautics segment.

That charge is for the development portion of the program with 40 percent of the cost already incurred, Chief Financial Officer Ken Possenriede told investors. The other 60 percent is embedded in the new schedule.

Possinriede said the unnamed program will “ultimately turn into a production program” and Lockheed believes “there are additional opportunities out there.”

Meanwhile, Lockheed’s agreement to acquire Aerojet Rocketdyne remains under an antitrust regulatory review at the Federal Trade Commission and examination by DOD.

Taiclet said Lockheed remains in the process of responding to the FTC’s second request for information sent in February, but still expects to complete the deal in the fourth quarter of this year.