Northrop spreads its wings with non-military projects
A car is stolen here about every 30 minutes, making it one of the worst cities in the U.S. for auto theft. But on a recent morning at least one thief found how much harder it might become to ply his trade.
A test camera developed by Northrop Grumman Corp. detected a car that had been reported stolen, discerning it from hundreds of other vehicles passing through a busy intersection in lower Manhattan. The camera triggered an alarm at a command center across the East River in Brooklyn.
“It went up at 9:02 and at 9:08 it spotted its first stolen car,” said Paul Chelson, Northrop’s wireless program manager, whose team is deploying a citywide public safety network for New York’s Department of Information Technology and Telecommunications.
“Once they saw how it worked,” he said, referring to police officials, “they got really excited.”
Northrop, which has its headquarters in Century City, is better known for building nuclear submarines, stealth bombers and spy satellites. It is the world’s largest military shipbuilder and one of the nation’s leading defense contractors.
But in anticipation of a slowdown in Pentagon spending, Northrop is looking at a new growth business in helping cities change the way they fight crime, put out fires and read parking meters.
“They don’t look as impressive as rockets, ships and airplanes, but the fact is that they are extraordinarily important and have immense value,” Ronald D. Sugar, Northrop’s chairman and chief executive, said of the company’s non-defense projects.
To Northrop’s thinking, chasing stolen cars through the urban canyons of Manhattan isn’t all that different from building spy planes that can spot suspected terrorists in Afghanistan or developing communications centers to coordinate U.S. military operations in Iraq by satellite.
“What they are doing for New York is a good application of the skills they honed with the military,” said Richard Phillips, Los Angeles-based vice president of the aerospace group for investment bank Houlihan Lokey Howard & Zukin. “It’s not making buses, like they tried to do once.”
Northrop indeed once tried to make and sell passenger buses, a business in which it flopped, and in the early 1960s it even helped build Dodger Stadium.
These days, Northrop aims to do more than just beat swords into plowshares and is focusing on projects that can draw from its principal businesses.
“We remain focused on our defense and national security mission. That is our core business, and we will continue to invest in it,” Sugar said. “But we are also undertaking a significant expansion into adjacent markets,” he said, whenever opportunities allow the company to build on the skills it has developed in defense and security.
After enjoying five years of annual Pentagon spending increases averaging 15%, defense contractors are determined to diversify.
In the last year, the nation’s largest defense contractor, Lockheed Martin Corp. of Bethesda, Md., has spent $1 billion buying obscure information technology companies that process data or develop computer networks for the Internal Revenue Service and the National Institutes of Health.
Chicago-based Boeing Co., the No. 2 defense contractor, is expected for the first time in five years to generate more revenue from its commercial aircraft business than from its military-related work.
Not to be outdone, Raytheon Co. of Lexington, Mass., began a pilot program this year in the Quad Cities area of Illinois and Iowa to set up a new communication system for police and fire departments.
Although these contracts are small compared with big-ticket fighter jet programs that can generate billions of dollars in revenue, they “complement and help keep the growth up when defense slows down,” said Paul H. Nisbet, defense analyst at JSA Research Inc. in Newport, R.I.
Developing communication systems and setting up computer networks for local and state governments can be highly lucrative, analysts say. It requires low capital investment yet can deliver strong cash returns.
“It is accelerating and growing faster than the military side. It’s growing and it’s profitable, so they’re chasing it hard,” Nisbet said of the leading contractors.
Last year, Northrop won military and non-military contracts valued at nearly $39 billion, and fueling the growth has been information services, with nearly $13 billion in new business, CEO Sugar said.
A third of the company’s $30 billion in annual revenue last year came from its information and services businesses, which include maintaining large government facilities, setting up computer networks for federal agencies and making equipment to sort mail for the U.S. Postal Service.
Northrop’s work for New York is one of the most prominent examples of the kind of business it will increasingly seek out, Sugar said.
The automated license plate reader that spotted the stolen car was just one of many technologies Northrop has been developing under a $500-million contract it won last fall to set up a new communication system for the city.
Seven other major information technology companies, including Motorola Inc. and Verizon Communications Inc., submitted bids.
The system -- which will use high-speed wireless devices to link city agencies, including the fire and police departments, is designed to address crucial shortfalls that were found in the emergency response to the Sept. 11, 2001, terrorist attacks on the World Trade Center.
Firefighters and police officers were unable to communicate with one another, for instance, because they were using different radio systems. Rescue crews didn’t know where to go because the city lacked a central command for coordinating the emergency relief effort.
“One of the most important lessons learned from the Sept. 11 attacks was that our emergency responders need better access to information and clearer lines of communications in the field,” New York Mayor Michael R. Bloomberg said shortly before the city awarded the contract to Northrop.
A New York official said that during the competition, Northrop’s technology was the “most successful in emergency simulations and multiple failure scenarios, including loss of commercial power and telecommunications.”
In a nondescript office building in downtown Brooklyn, Northrop has set up a military-style command center to test and demonstrate its wireless system.
Once it is operational, with an expected start in early 2008, the Northrop system will allow police, firefighters and other emergency personnel to communicate with one another anywhere in the city, including inside high-rise buildings and highway tunnels.
The broadband system, using next-generation wireless technology, will allow emergency personnel to view high-resolution photographs, streaming video and e-mail on computer monitors in their vehicles, even when they are racing along a street at high speed. At the command center, personnel will be able to monitor the position of the emergency vehicle -- as well as every other police car and firetruck in the city -- on a big-screen TV.
Emergency coordinators will be able to zoom in on a building and assist rescue crews in searching the premises.
For dealing with hostage situations, Northrop has tested a black baseball-size device with a built-in maneuverable camera that can be thrown into a room and transmit live video images to officers at the scene or to the command center miles away. The wireless infrared camera works in the dark.
“As people see the robustness of the system, they realize they have a big pipe that can handle a lot of different applications,” said James R. O’Neill, president of Northrop’s information technology unit. “It’s going to be a big tool limited only by your imagination.”
In recent tests, Northrop engineers placed a wireless camera at an intersection where the World Trade Center once stood. Using a wireless laptop computer at Northrop’s Brooklyn facility, program manager Chelson was able to have the camera zoom to a sign across the street about 100 feet away.
Zooming in even closer, it spotted a 1-inch sticker that had been placed on the street sign. It was an American flag with stars and stripes clearly visible.
“The future success of crime fighting and public safety in general is inexorably wedded to the ability to quickly access data and share it,” New York Police Commissioner Raymond W. Kelly said last fall when it was announced that Northrop had won the contract. “This advanced network is a giant step into the future.”
For Northrop, the project could well lead to other business.
If it succeeds, “there is no reason we can’t scale the system to any city,” O’Neill said, adding that cities in the U.S. and abroad have been closely following its work.
“If you can do it in New York, you can do it anywhere,” he said.
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