Stealthy drones in spotlight as they get smaller

BANGALORE (Reuters) - Picture this -- patrol troops are forced to scramble for cover as sniper bullets whizz past their ears. To halt the spray of deadly bullets, a tiny drone is launched into the air to beam back the sniper's coordinates for an air strike that will snuff him out.

Due to their ability to act as stealthy eyes for soldiers, these easy-to-launch and remotely controlled drones, or unmanned aerial vehicles (UAVs), are seeing tremendous growth in an already burgeoning industry, even as they get cheaper, smaller and more discreet.

Swarms of smaller UAVs, which can easily be carried in a backpack, are being increasingly deployed by U.S. troops as their "eyes in the sky." The U.S. Department of Defense (DoD) calls them Level 1 Unmanned Aircraft Systems, weighing less than 20 lbs and flying below 3,000 feet.

Small UAVs are force protection assets that keep soldiers from harm's way by securing large areas quickly, acquiring targets, and assessing battle damage and convoy security.

Massive purchases of these portable systems are being driven by immediate needs on the battlefields of Iraq and Afghanistan.

The DoD's roadmap for unmanned systems expects $21.63 billion will be spent on unmanned aerial vehicles (UAVs) between 2007 and 2013, while defense research firm Teal Group sees $55 billion in UAV spending in the next ten years.

"The levels of spending are astronomically higher than they were just ten years ago and way beyond what was happening 20 years ago," defense research firm Forecast International's unmanned systems specialist, Larry Dickerson, said.

Currently, the overall UAV market is dominated by makers of large systems such as Northrop Grumman Corp (NOC.N), which makes the Global Hawk, and General Atomics, which makes the Predator systems.

But once companies were able to shrink UAV technology and capabilities, the real need to get them into the hands of soldiers on the front line emerged, Boenning and Scattergood analyst Michael Ciarmoli said.

LITTLE LIFE SAVERS

Small UAVs will become standard issue because they save lives. Even as budgets come under pressure, no one is going to cut funding for UAVs, Jesup and Lamont Securities analyst Alex Hamilton said.

The U.S. army's workhorse small UAV is the Raven, made by AeroVironment Inc (AVAV.O), which reportedly flew 150,000 combat hours in 2007.

"If you're trying to see over the hill and you do not have the capability because you are being shot at, you will deploy an asset in real time like the Raven," BB&T Capital Markets analyst Michael Lewis said.

Currently AeroVironment has 1,900 Raven systems under contract, of which about 900 have been delivered. The total planned inventory for Raven in the DoD roadmap is at 3,333 systems.

Each system typically consists of three aircraft, a hand-held ground control station, a remote viewing terminal, systems spares, and basic training and maintenance resources.

Earlier this month, Honeywell International Inc (HON.N) won a $65 million contract to supply U.S. armed forces with its backpack UAV, the T-Hawk.

Though small UAVs are seeing strong sales now, defense spending will eventually level off to a slower peacetime procurement pace as US operations wind down in Iraq and Afghanistan, Forecast International's Dickerson said.

Foreign purchases will pick up, but only at smaller volumes, he said.

VULNERABLE OR LETHAL?

Despite the success of small UAVs in a counter-insurgency environment, their abilities in conventional warfare stand untested, especially against a modern army with electronic warfare capabilities.

In the recent conflict between Russia and Georgia, probably six to twelve Georgian drones were shot out of the sky by Russian forces there were not reluctant to open fire on these UAVs, Forecast International's Dickerson said.

Nevertheless the future of UAV technology is expected to range from law enforcement to weaponized systems with lethal payloads capable of decimating the enemy.

AeroVironment's Swtichblade is being toted as the first weaponized small UAV, while the DoD's research wing, Defense Advanced Research Projects Agency (DARPA), has contracted the company to develop a bug-sized Nano Air Vehicle (NAV) with three-inch flapping-wings.

"(UAVs are) the first technology introduced by the military in a long time that has potential to keep getting cheaper, smaller, lighter," Pacific Crest Securities analyst Erik Olbeter said.

"It's about time that you got something like this in the military."

(Editing by Pratish Narayanan)