Defense Spending Shift Likely

LOS ANGELES - In the nation's "new kind of war"on terrorism,defense spending is likely to focus as much on information and surveillance as bombs and bullets.

Unlike previous conflicts, which relied heavily[on]tanks,fightre jets and ships,a prolonged campaign against terrorists will place increased emphasis on an electronic battlefield that will require sensors and software, analysts said.

Companies such as Northrop Grumman Co.,which is developing a long-range unmanned surveillance vehicle and has invested heavily in electronic warfare systems,should benefit.Other contractos building the next generation of satellite-guided missiles and sensitive snooping devices also will play a role.

"This is a new war that will require new weapons,"said John Kutler, chairman and chief executive officer of Quarterdeck Investment Partners,a Los Angeles investment bank that focuses on aerospace and defense."The Pentagon has been paying lip service over the past 10 years to its need to find a new mission in the post-Cold War environment.Unfortunately, it didn't find the mission.The mission found it."

It's too early to predict which companies and which weapons systems will be funded until the administration outlines the scope of its military response to the terrorist attaks of Sept.11.Bush,two days after the attacks, said "a new kind of war"had been declared on the United States and added, "My resolve is steady and strong about winning this war."

Analysts said the new style of warfare will rely more than ever on collecting and interpretating data, then communicating that information quickly and securely to troops in the field. That need is even greater if the United States attacks countries with few stationary military targets such as missile silos or bases.

Companies including General Atomics Aeronautical Systems Inc.,which makes the Predator unmanned spy plane and Raytheon,which makes radar systems and cruise missiles, should benefit.

Bullets and bombs will still be needed to fight a sustained war, especially if ground troops are used to invade countries that harbor terrorists, analysts said.Money to upgrade existing weapons systems already was part of the Defense Department's budget plans before the terrorist attacks.

"During the Kosovo air war, we almost ran out of stuff to drop, John Williams, a spokesman for the National Defense Industrial Association, a trade group."Munitions are probably the first thing, depending on how massively we want to do this and what the eventual targets are."

Congress will soon receive a Pentagon review of military spending, which should reveal the defense department's priorities for the next four years.

The Senate is considering a request for $343 billion for Defense and Energy department needs.The spending bill already has passed the House after legislators there diverted some money President Bush wanted for his missile-defense program to counterterrorism efforts.

And an announcement on the next generation fighter plane, the joint strike fighter, should be made within the next month.Boeing and Lockheed Martinare competing for the contract.

Glad to see that the AP is catching up on material already six months old.

I know. I'm trying to figure out if I want to add a few of the above to my ShareBuilder account with Wells Fargo.I heard Hugh Hewitt mention the other day that he had stock in Raytheon,the company that builds Patriot missiles.I think it's selling for something like $33.00-35.00 a share.That might be a good one to add.What do you think?

I think now is a good time to buy some stocks in Raytheon who makes cruise missiles.

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