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Navy Directed Energy Weapon Contract Aids Kratos Defense Restructuring Plan

A former wireless infrastructure company that has set its sights on military contracts recently got a major boost in its corporate turnaround with an award supporting the U.S. Navy’s Directed Energy and Electric Weapon Systems (DE&EWS) program.

Indeed, the $11 million contract continues a string of significant wins for Kratos Defense & Security Security Solutions as it focuses on increasing its penetration of the federal defense market. Based in San Diego, Calif., Kratos is a fast-growing, acquisition-minded federal contractor that does business with every major unit of the DoD.

Kratos executives note they have supported the DE&EWS Program Office since 2004. DE&EWS is responsible for managing the research, development, integration and acquisition initiation of DE&EWS for the Navy’s surface forces.

Navy officials foresee using laser weapons as next-generation systems capable of striking targets at the speed of light. During tests last year, a ship-based, directed-energy system knocked down several unmanned aerial vehicles.

“We look forward to the Kratos team of professionals having the opportunity to continue providing effective and efficient support to the U.S. Navy in their ongoing and vital role in support of our nation’s defense,” Jennifer Crane, a senior Kratos executive, said in announcing the award.

For Kratos, the Navy contract continues a transformation process that dates back to 2004, when the company appointed Eric DeMarco as CEO in the hopes of successfully moving out of its moribund wireless business. The company had been a high-flying technology company, but never fully recovered from the “dot com” crash of March 2000.

Before DeMarco’s appointment, Kratos did no business with any federal agency. Today the company provides the government with information technology (IT) services, defense engineering, and weapons systems support. Last year, weapons systems work accounted for nearly 56 percent of the company’s $482 million in revenue.

With DeMarco at the helm, the company also is focusing on the sprawling Alliant contract vehicle for IT services that spans the federal government and is worth up to $50 billion over 10 years. The U.S. General Services Administration says Alliant specifically targets Pentagon computer network improvements.

To make the list of 59 approved contractors, DeMarco paid $53 million to acquire SYS technologies, a supplier of federal computer network and engineering services. That was in 2008.

To further grow its defense franchise, Kratos made two additional recent acquisitions. In early August, Kratos acquired DEI Services Corporation (DEI), a privately-held, premier provider of simulation and training devices to military customers. Kratos did not provide a purchase price for the transaction.

In April, Kratos agreed to buy Gichner Holdings, Inc., which designs and builds tactical shelters, modular containers, and support equipment for the U.S. military, its allies, and leading defense prime contractors. Kratos valued the deal at $133 million.

Since the beginning of 2010, Kratos has announced military contracts worth roughly $223 million. In its most recent presentation to investors, Kratos said it has a pipeline of contracts worth about $745 million.

By far the two largest military contracts announced this year are for the Navy. In a $51 million contract announced April 8, Kratos said that with a strategic partner it will provide the Space and Naval Warfare Systems Center Pacific with tactical data link systems.

On May 7, Kratos said it won a $49.9 million contract with the Naval Surface Warfare Center, Dahlgren Division (NSWCDD), located in Dahlgren, Va. Under that award, Kratos will provide Dahlgren with a range of services designed to help determine the lethality and vulnerability of weapons systems, the company said.

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Michael A. Robinson has written articles for some of the nation's more prestigious publications. As...