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uh well it defense electronics and
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services is about a $6.2 billion uh
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defense group within it corporation
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which is about almost a 12 billion
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company it's a multi-industrial company
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and for our part in the defense group we
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tend to focus on Communications sensing
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and surveillance uh space based products
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as well as advanced engineering and uh
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services to our war Fighters wherever
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they may
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be you know we began to see a little bit
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of a downturn in the fourth quarter
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particularly in the commercial side of
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our business uh with respect to defense
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uh we continue to support all the needs
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of the Department of Defense as well as
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some other agencies and we have not yet
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seen uh any kind of a substantial drop
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off which I think makes sense given that
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a new Administration really has just
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come into power um they need an
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opportunity to take time to review the
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budgets and determine where they'd like
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them to go in the future so for now in
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this year we see actually more stability
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than not in the defense
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sector it defense actually began to look
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at you know different potential markets
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several years ago uh and had already
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been trying to move into some adjacent
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markets or to leverage some of the
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capabil abilities that we have within
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the company to provide a higher level of
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service in the markets that we serve uh
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we also have looked more at
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International markets uh because there
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is a quite a good demand for it defense
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products in the international Arena uh
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and so I wouldn't say that we have
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fundamentally adjusted the way that we
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do our strategy and our approach to
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strategy but we have looked for new
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markets to serve one example of that is
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in uh a program called adsp which is the
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air traffic control program for the
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Federal Aviation Administration not
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typically
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a place where a defense company would uh
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would reside but we uh started several
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years ago to uh you know pull together
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capabilities that would allow us to
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compete for and win that contract which
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has a lot of potential in a non-defense
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sector you know I would say that uh we
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are always looking for uh a supply chain
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that gives us the greatest benefit and
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you know the globalization that has
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occurred in all marketplaces I think is
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equally true with respect to it it's
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little tougher sometimes on the defense
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sector because of things like bamerican
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provisions and so forth that have
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typically been a part of that realm um
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but we are always looking to increase
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our productivity in the company and in
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fact uh have had a very robust uh you
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know value based Six Sigma uh approach
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that we have applied in all of our
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businesses for many years now certainly
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it goes right to our manufacturing
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processes uh you know and looking for
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ways to try and either you know uh
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increase the efficiency of the supply
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chain or to improve our processes uh or
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to use new technologies to to give us
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greater yield uh for the capital base
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that we have all that has been going on
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consistently uh and you know we have we
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have tried to make sure that we have
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multiple suppliers for each aspect of
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what we do whether it be production of
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radios or Jammers or night vision
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goggles uh to ensure that uh in
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particularly in this environment if
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somebody has economic difficulties as a
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result of the financial crisis that we
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will not uh have a a you know
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commensurate impact in our ability to
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produce our products for the
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government all of us uh are concerned
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about what is the future of defense
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spending uh I think uh you know if I
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were to try and get my crystal ball out
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I would say we would enjoy relative
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stability here in uh in fiscal year 09
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uh I think we'll start to see some
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elements of change uh in the fiscal year
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10 budget uh that will come upon the
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scene probably in the spring time frame
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after the new Administration has had a
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chance to review it uh and as you know
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during this year uh the Obama
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Administration will engage in uh an
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exercise called the quadrennial defense
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review which is a top to bottom review
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of strategy to resources and I think uh
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when that report uh goes in with the
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budget in February of 2010 we'll begin
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to see what are the big changes uh that
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will be in store for all of us in 11 and
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12 time frame that being said uh you
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know it is finished a Very Good Year in
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2008 uh we think we are somewhat
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resilient uh to the kinds of potential
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impacts that we might see in the defense
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Arena which are mostly oriented on large
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platforms uh and adjustments in how much
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we're buying of the big acquisition
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programs and because of the places where
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we tend to operate you know high value
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markets uh we still see a lot of
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opportunity uh even in the 10 11 and 12
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time
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frame you know if you look at the
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priorities in this new Administration uh
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they tend to focus on intelligence
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surveillance and reconnaissance
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capabilities uh communication
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capabilities um you know sensing and
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surveillance uh some of the very markets
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uh that we are are most dominant in and
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so I still see a lot of opportunity
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there and and when you consider that we
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will be bringing back forces that have
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been in theater for now on to six or
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seven years all of that equipment uh and
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and Communications equipment and sensing
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equipment will have to be reset uh to
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get ready for the next challenge that
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comes along and I think that one of one
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of our goals is to make sure that we are
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positioning ourselves to have the best
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capability to reset to a higher standard
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uh so that you have something better
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than uh it originally was when you bring
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it out uh of a reset
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activity well we we try and invest
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appropriately uh you know in our own uh
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you know investments in science and
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technology uh a large part of our
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company tends to do a lot of work with
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Laboratories uh you know night vision
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Laboratories and others um we do a lot
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of work with specialized communities
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that deal in intelligence and so we tend
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to be on the front edge of a lot of the
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technological developments that occur um
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and that being said we always will look
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within our portfolio do we have the
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requisite capability can we grow it uh
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can we invest in it and if not where
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might we go to potentially uh buy or
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acquire that kind of capability which we
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believe is needed for the future so we
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end up partnering a lot uh with other
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companies both some of the big primes in
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the defense sector uh and in some cases
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they're the prime and we're the sub and
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in other cases we're the prime and
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they're the sub it all depends on the
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particular
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product well I think you know uh one it
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is understanding the context in which we
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envir you know the environment in which
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we are are uh existing right now to
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understand you know what are the
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priorities of a new Administration what
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kind of things are happening globally in
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terms of Defense markets or defense
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spending um certainly the economic
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conditions that uh face us all right now
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because no is immune to you know the the
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credit Market seizures and the other
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things that have been a part of this
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financial crisis so I think it is
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understanding that context uh building
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an appropriate strategy to deal with it
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for the future that has enough
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flexibility in there that you're you
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know you can weather what will be a
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business cycle or a defense cycle and
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still emerge from the other other end of
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that with the right products and
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capabilities that are needed by
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customers at the end of the day the
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customer will always drive the areas
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that we go into and the Investments that
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we make because because you know that is
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who we serve and we want to produce the
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best capabilities possible for them for
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more business news and Analysis from
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knowledge at Wharton please visit
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