September 19, 2007 / 4:04 PM / 12 years ago

Northrop sees growth ahead in homeland security

WASHINGTON, Sept 19 (Reuters) - Northrop Grumman Corp (NOC.N) generates about $1 billion in homeland security revenues each year and says it expects annual growth of over eight percent in the sector over the next three years.

Yearly growth could reach around nine percent in about five years, as more and more large-scale homeland security programs take shape, creating operations and support work for contractors, said Bruce Walker, vice president of homeland security for Northrop, in an interview with Reuters.

“We’re going to start to see an upswing in the adoption some of the technologies that are currently being tested and designed,” Walker said.

Northrop is already one of the biggest U.S. homeland security contractors, given its role with Lockheed Martin Corp (LMT.N) as prime contractor on the U.S. Coast Guard’s $24 billion, 25-year Deepwater modernization effort.

It is also a key player in other areas, including detection of anthrax for the U.S. Postal Service, and use of biometrics for citizenship and visa services. Biometrics refers to use of measurable physical characteristics, such as fingerprints, irises, and even veins, to authenticate identities.

Going forward, Walker said the company was focused on three growth areas: biometrics and immigration management; persistent surveillance from the ground to an altitude of 65,000 feet; and expanding use of Northrop’s wide range of sophisticated sensors for detecting weapons of mass destruction or other threats.

Northrop had been active in homeland security-related areas such as law enforcement and intelligence long before the Sept. 11, 2001, hijack attacks, Walker said.

“Homeland security for us really isn’t different business,” said Walker. “It’s core delivery capabilities that are already established in our various sectors.”

Northrop and other big defense companies had an edge in the homeland security market because they had existing ties to various agencies, like the Coast Guard, that were wrapped into the U.S. Department of Homeland Security (DHS) when it was created five years ago.

“We’ve got great access, but it’s because we’re an incumbent. If you’re trying to break in over there, it’s much more difficult, because there’s a lot of change,” he said, referring to a high rate of turnover among DHS officials.

In addition to its status as the No. 3 Pentagon supplier, Northrop also has a cadre of experts on federal civil contracts after years of working on Postal Service automation, and information technology systems for the U.S. Treasury, Commerce and Justice departments.

Despite its incumbent status, Walker said Northrop really had to scramble to win a contract last October to continue providing biometric services for the U.S. Citizenship and Immigration Services agency within DHS.

Northrop had been doing similar work for the Immigration and Naturalization Service since 1999, but the new deal — valued at $750 million over the next five years — was with a different agency with a different mission, he said.

Northrop’s biggest disappointment on the homeland security front was losing a contract valued at over $2 billion to secure the U.S. border with Mexico to Boeing Co (BA.N), he said.

Walker said Northrop still hoped to pitch its high-altitude unmanned Global Hawk surveillance plane to monitor the northern U.S. border with Canada.

It also hoped to grab part of an estimated $800 million in expected border security-related work to be ordered over the next three years by DHS under its EAGLE purchasing program.

Clearly, a big chunk of homeland security spending would go for personnel costs, boots and equipment for customs agents and other markets in which Northrop does not have a big stake, Walker said, but there were other promising opportunities.

For instance, Northrop planned to continue expanding its emergency call systems business. The company has built 450 to 500 of the systems used by cities around the country, and one out of every four 911 emergency calls comes in on Northrop equipment.

“It’s a nice piece of business,” Walker said.

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