Analysis: Defense firms keep up sales

By LEAH KRAUSS, UPI International Security Industry Correspondent  |  Nov. 15, 2007 at 10:51 AM
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HAIFA, Israel, Nov. 15 (UPI) -- Two of Israel's biggest defense companies released positive financial results this week, continuing the upward trend for the Israeli security market.

Haifa-based Elbit Systems Ltd. announced strong growth during the third quarter of 2007.

"We are pleased to report another strong quarter of growth, which was based on organic revenue growth of 19 percent and contribution from acquisitions, bringing our overall revenue growth to 38 percent over last year," Elbit's president and chief executive officer, Joseph Ackerman, said via a company statement.

"Our two recent acquisitions, Tadiran and Ferranti Technologies (Group) Limited, both of which are important steps in our strategy for accelerated growth, have already borne fruit and we have already reaped some of the benefit," Ackerman continued.

The quarterly earnings announcement capped a week of mostly good financial news for Elbit. On Monday, the firm announced a new $30 million deal with the Israel Defense Force for the supply of unmanned aerial vehicles.

"The order ... includes the development, manufacture and supply of new and improved UAV systems, as well as the upgrade of existing UAV systems, designed to enhance and expand the IDF's existing UAV platform," according to Elbit.

The order includes the supply of Elbit's new Hermes 450 UAV that according to the company was used during Israel's 2006 war in Lebanon for gathering visual intelligence.

Much of the product's development depends on IDF testing, Haim Kellerman, the company's vice president and general manager of the UAV division, said: "The accumulated operational experience and feedback we receive from the IDF are important elements in the success of the Hermes 450 around the globe."

This is also frequently the case for defense products manufactured by Israel's other major defense companies, Rafael and the state-owned Israel Aerospace Industries.

Also contributing to this quarter's financial success, Elbit said, was a merger with the company's subsidiary, Tadiran Communications.

Israel Aerospace Industries also announced a major deal this week for the supply of air force training systems: the firm's MLM Division "will supply EHUD Air Combat Maneuvering Instrumentation systems for training and debriefing of air combats to two undisclosed customers for a total value of $41 million," the company said in a statement Tuesday.

"The new system is a real-time training package which includes advanced ground-to-air and air-to-ground weapon simulations as well as virtual embedded training," according to IAI.

"Air Defense units using (the system) are able to train against live and virtual targets simultaneously creating high fidelity training scenarios. The system provides the capability to monitor and control the exercise in real-time as well as post mission debrief," the company said.

IAI President and Chief Executive Officer Itzhak Nissan indicated via the statement that he sees the deal with these Asian countries as just the beginning of the potential market for the system: "This capability has a significant demand in other air forces around the world," he said.

The general manager of the MLM division, Uri Sinai, said in the statement that "the EHUD system ... sets the standards for aerial training systems in NATO countries."

Business Monitor International, in a five-year market research report titled "The Israel Defense & Security Report," called the country's defense industry "one of the world's most advanced."

"Israeli arms exports are currently flourishing, with lucrative relationships created with major weapons purchasers such as India and Turkey. In 2005, transfers totaled some ($3 billion) in current prices, ranking Israel among the top six exporters in the world," Business Monitor International stated in its executive summary of the report.

Though the report makes note of some instability and uncertainty in Israel, Business Monitor International's assessment of the Israeli defense industry is confident: "The Israeli defense industry is set to thrive, regardless of the immediate political or security environment in which it operates."

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