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09 Sep 06. BAE shares lose their shine. After weeks of euphoria following the multi-billion Typhoon deal with Saudi Arabia, BAE shares have lost their shine seeing the shares fall from 4440p in June to 380p today. Ladbrokes have put a price of 6-1 on their not returning to 410p by December 29th – fill your boots!
Several factors have caused this one being the sale of the Airbus stake for a reported £1.9bn (still to be decided and voted on), (See ‘SPEAKING THE SAME LANGUAGE’ below), one, the true value of the Typhoon deal which readers will understand has to be shared with its Eurofighter partners, apart from the support deal, two, the fact that these aircraft are actually being taken out of the ‘European Pot,’ thus there is no actual increase in orders which would explain the failure of key supplier’s shares such as Cobham to benefit from this announcement, thirdly and more importantly, as we have discussed on these pages in detail, there are continuing worries as to the profitability and viability of the company’s U.K. Land Systems business. Sources close to BATTLESPACE suggest that information has reached them that the M777 Howitzer contract with the U.S. accounts for 35-50% of profits in the unit over the next two years, after which the contract tails off. As supremo Andrew Davies is reported to have stated at a seminar earlier this year that the unit is not viable under current order intake. The losses at this unit are believed to be continuing well into the next two years after which the scenario is dire. The Newcastle plant finishes the Titan, Trojan and Terrier work by 2009, the M777 contract at Barrow finishes about then unless the U.S. Marines order the gun, the U.K. is unlikely to given the LIMAWS project’s slow progress and that of the portee requirement. Reports are circulating of BAE making strong overtures to the MoD to bring forward a number of key projects such as new Terrier orders to meet a FRES requirement, the Challenger 2 smooth bore requirement, Warrior Upgrades and FRES. Lord Drayson is believed to be sitting on the latter with an announcement to be made in late October. The most likely contract to save the day is the Warrior Upgrade given the strong usage of these vehicles in Iraq. In previous years the staff at Newcastle have used huge initiative to keep the plant going given the lumpiness of the business in tank production. When the Editor visited in 1982 they were making spars for the HSBC building in Hong Kong, perhaps more lateral thinking is required after the empty Order book was found post-due diligence. The orders predicted by Trevor Harrison and his team would have kept the plant busy for many years. But given the huge hole in the defence budget, only a political fix to save the Newcastle plant, given its closeness to Sedgefield may be the answer, but, hang on isn’t the current incumbent hanging up his boots? The BAE interims due out on Wednesday may answer these questions? Is a write off on the value of the AlvisVickers acquisition on the cards, last year Mike Turner told the Editor that it was not required due to the strength of Hägglunds. But, has the lack of orders in the U.K. dragged the whole segment down this year?

07 Sep 06. BAE Systems Inc reached a definitive agreement with National Sensor Systems (NSS) to purchase all of the shares of the company for $8.7m in cash. NSS, a privately held company based in Acton, Mass., specializes in the development of electro-optical sensor systems for aerospace and defense applications. NSS also provides gimbal and stabilization systems to the Department of Defense and other government agencies. NSS employs 20 engineers and scientists. Walt Havenstein, president of BAE Systems Electronics & Integrated Solutions headquartered in Nashua, N.H., said, “NSS’ technology expertise will help BAE Systems expand its capabilities in airborne sensors, electronic warfare and communications. In turn, we expect to take that expertise to the next level of innov

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