Tensions seen boosting U.S. missile defense exports

By Jim Wolf

FARNBOROUGH (Reuters) - Overseas sales of the U.S. Army's core missile defense system appear set to boom, spurred by tensions surrounding Iran, North Korea and other regional disputes.

Poland, Taiwan, Kuwait, Turkey, South Korea, Saudi Arabia and Qatar are among countries that could spin off billions of dollars in related revenue over the next five years, according to Raytheon Co (RTN.N), the army's primary contractor for the Patriot air and missile defence system.

Raytheon Chief Executive Bill Swanson said in April that sales could be in the "big billions" by 2013 or 2014 for what the company calls the world's premier system of its kind.

The name "Patriot" is an acronym of Phased Array Tracking Radar to Intercept Of Target. Currently, one version or another is used by the U.S. Army and partners in 10 countries: Germany, Greece, Israel, Japan, Kuwait, Netherlands, Saudi Arabia, Spain, Taiwan and South Korea, which became the latest addition last year.

Patriot competitors are made by companies in Israel, Russia and France.

Separately, Lockheed Martin Corp (LMT.N), the Pentagon's No. 1 supplier by sales, is the prime contractor for an upgraded Patriot Advanced Capability PAC-3 missile and its launch containers that may be integrated into the Patriot system.

Waltham, Massachusetts-based Raytheon is highlighting the system at the Farnborough air show, a biennial arms bazaar and aviation showcase that opened on Monday near London.

The company said Tuesday it had received more than $200 million in its latest wave of Patriot-related contracts, including deals involving Kuwait, South Korea and the U.S. Army.

This added to a total of roughly $500 million in contracts announced since late last year by Raytheon, the world's biggest missile maker.

"In Asia, Europe and the Middle East, the market for Patriot upgrades is big and getting bigger," said Joseph Garrett, a retired Army major general who is a Raytheon vice president for Patriot programs.

"We also expect several countries that do not currently use Patriot to join those now using it, with new sales possibly starting as soon as next year," he said in an interview.

Paul Nisbet, a defence industry analyst at JSA Research Inc, predicted Raytheon Patriot-related revenues of at least $1 billion annually for the foreseeable future, up from what he figured had been about $700-800 million annually.

"With the increasing threats of the Iranian and North Korean missiles," he said in an email interview, "we would not be surprised to see demand for new and upgraded Patriot systems well beyond what we have been forecasting."

Robert Stevens, Lockheed Martin's chief executive, said Sunday that sales of his company's Patriot PAC-3 missiles also were being driven by perceived threats.

"We feel that that is an area in our company that is likely to experience continued and sustained growth," he said at a London dinner on the eve of the Farnborough show.