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Spacecoast Business

Breadth of Technological Expertise

Positions DRS for Record Growth

By Anne Straub

While DRS Technologies Inc. products are being used on the battlefield in Iraq, keys to the company’s record revenues and projected success go beyond any particular military action.

Parsippany, N.J.-based DRS develops, manufactures and supports a range of systems for mission critical and military sustainment requirements. Among its products are thermal imaging devices, combat display workstations, electronic sensor systems, rugged computer systems and air combat training systems. More than 10 percent of the company’s 10,000-member worldwide workforce is employed in Brevard County.

They make military devices based on longstanding projects, and boast backlogs ensuring business well into the future. In fact, investment banking firm Morgan Joseph started covering DRS in August with a favorable rating.

“We think the budgets for the kinds of information-related capabilities DRS provides will grow regardless of the status of the U.S. military presence in Iraq,” the firm said in a report. The company is well-positioned, it said, to benefit from changes necessary for national and homeland security.

DRS, founded in 1968, has a history of growth. The company went public in 1981 and completed its first acquisition in 1984. The acquisition mode continued, to the tune of more than 30 purchases. Most recently, DRS acquired Engineered Support Systems Inc., a St. Louis-based supplier of integrated military electronics, support equipment and technical services. The deal was completed during the fourth quarter of fiscal 2006.

Former Palm Bay firm Paravant Computer Systems Inc., maker of rugged computer systems, is now part of DRS’s Command, Control, Communications, Computers and Intelligence segment.

Such purchases, as well as increased sales in continuing divisions, helped land the company on Forbes magazine’s 2007 list of the 25 fastest-growing technology companies. DRS ranked No. 20, in part because of its 34 percent annualized five-year sales growth. The list looks at growth and profitability of 2,200 public technology firms.

Most Melbourne-Palm Bay DRS employees work for the company’s Reconnaissance, Surveillance & Target Acquisition segment, known as RSTA. The segment makes sensors and targeting systems, as well as optronics used primarily by the U.S. Army.

“We basically are the eyes of the battlefield,” said Todd Stirtzinger, vice president and general manager of the DRS Sensors & Targeting Systems Inc., Optronics Division.

The segment uses electroptical infrared technology for sighting and targeting on ground, airborne and soldier-based systems. The goal, Stirtzinger said, is to aid the military’s objective to see first, act first and finish decisively.

Among the systems worked on locally is the Mast Mounted Sight, an electo-optical sighting system with visible and infrared capability. The MMS is designed to be mounted above a helicopter’s rotor or on a ground combat vehicle. The device uses a high-resolution camera, thermal imaging sensors and laser rangefinder to aid visibility at night and in bad weather. On the helicopter, MMS lets the aircraft hide behind terrain while maintaining 360-degree surveillance.

The program is one of many at DRS that are continuing in current production while generating business in sustainment of units in the field. The company’s diverse funded backlog – totaling more than $3 billion -- is one feature that prompted Morgan Joseph to follow the firm’s performance. “Unlike some contractors who work on a few highly focused programs, DRS works on hundreds, and thus is able to mitigate the risk of any single program anomaly,” the firm said.

The MMS also demonstrates one of DRS’s core technologies, Stirtzinger said. The company is a leader in infrared technology, used in various surveillance systems designed for different applications. Some are pegged for future combat systems on platforms entering development, while others have entered the sustainment phase.

Brevard County is ideally situated to support DRS. As home to Florida Institute of Technology and a branch of the University of Central Florida, as well as Kennedy Space Center, Harris Corp., and divisions of other high-tech giants, the county provides fertile ground for high-tech ventures. Add to that its proximity to the I-4 high-tech corridor, and the area provides a wealth of skilled workers.

“There’s a rich history here of high technology that allows us to get the employment we need,” Stirtzinger said.

The labor pool prompted the company to locate part of its Sustainment Systems segment in Brevard. “There’s a lot of good talent coming out of local colleges and universities,” said Phil Niosi, vice president and general manager of the Melbourne location for DRS Sustainment Systems.

The segment has developed a niche market in electronic warfare systems test and maintenance. DRS builds the antenna couplers that are used in test equipment. The device simulates a threat to aircraft and then ensures that the avionics are behaving properly and producing the correct signals.

The U.S. Air Force is a major customer, and more recently, DRS is finding markets in Europe to support fighter aircraft in the United Kingdom and the Dutch F-16. Those business lines will continue in maintenance mode well after current military action subsides, Niosi said. That follows a trend in world militaries to spend more on maintaining electronic warfare and protection systems.

“Updating is cheaper than replacing aircraft,” he said.

Commercial aircraft could eventually be outfitted with for DRS radar warning receivers, which warn against man-portable, shoulder-launch missiles, a potential terrorist threat to aircraft. The idea has been discussed within the context of homeland security, but would be very costly to institute, Niosi said.

Looking ahead, the sustainment segment is moving with the rest of the industry into synthetic instrumentation, a method based on general-purpose hardware that derives its function from software. In the area of automatic test equipment, synthetic instrumentation would allow manufacturers to use circuit cards as building blocks that can be reconfigured through software. The result would be lighter and smaller test equipment, said Mike Lovelace, vice president of business development for the sustainment segment.

Also in Brevard, the company’s Tactical Systems division – part of the Command, Control, Communications, Computers and Intelligence segment -- focuses on rugged computers, including workstations, handheld computers and a Hammerhead laptop line. The segment is involved in the U.S. Army’s effort to track military operations digitally, via satellite.

Used for the first time during the Iraq war, Force 21 Battle Command, Brigade and Below (FBCB2) allows commanders to see their assets and enemies in real-time formation on a computer screen in an operations center.

In August, DRS won a $131 million contract for combat computer systems for the FBCB2 program. Work is being done in Melbourne, and the company is expected to begin delivering the systems in November.

Also among recent contract awards are two for the RSTA segment during the first quarter, which ended June 30:

$59 million for sensor sighting and targeting products using uncooled infrared technology as part of the multiyear U.S. Army Driver Vision Enhancers  program.

$48 million to produce airborne thermal imaging systems and Forward Looking Infrared sensors, to support the Mast Mounted Sights on the U.S. Army's OH-58D Kiowa Warrior helicopters.

Local Workforce

DRS employs more than 1,400 people in Brevard County among three business divisions. Its fourth operating segment, Technical Services, is not represented on the Space Coast.

Brevard employment breakdown
by division:

• Command, Control, Communications, Computers and Intelligence (C4I): 400.

• Reconnaissance, Surveillance & Target Acquisition (RSTA): 1,000.

• Sustainment Systems: 40.

2007 Stellar Financial Results

DRS Technologies Inc. Chairman Mark Newman calls fiscal 2007, which ended March 31, the best in the company’s 39-year history. Some results:

Revenue: $2.82 billion, up 63 percent.
Net earnings: $127.1 million, up 56 percent.
Earnings per share: $3.12, up 17 percent.