Lockheed Chief Sees Commercial Demand for Cybertechnology

Lockheed Martin Corp., the world’s largest defense contractor, sees an expanding market for its cybersecurity products and services among companies in industries from energy to banking, Chairman and Chief Executive Officer Marillyn Hewson said.

“If you’re talking about moving in the commercial space with cybersecurity, there is a strong demand for it” because of Lockheed’s expertise, developed from years of providing such services to the U.S. government, Hewson said today at a Bloomberg Government breakfast in Washington. “It is the fastest-growing element within our information-technology organization.”

Lockheed, whose weapons portfolio includes the F-35 Joint Strike Fighter, the U.S. Navy’s Littoral Combat Ship and C-130 transport planes, sees cybersecurity service as a stepping stone into the commercial marketplace, said Hewson, 60, who became Lockheed’s top executive in November 2012.

“There are a lot of companies that are interested” in Lockheed’s expertise, “particularly those that are vulnerable - - like energy companies, utilities, banks and health care” and industries that “have big systems that can benefit from our understanding of how to deal with advanced persistent threats,” Hewson said.

Second-Biggest Unit

Lockheed’s information systems and global solutions unit, which includes its cybersecurity business, is its second-biggest business, with annual sales of $8.37 billion in 2013, after the aeronautics unit, which had sales of $14.1 billion.

Lockheed fell less than 1 percent to $154.02 at 3:50 p.m. in New York trading after rising 76 percent in the previous 12 months. The company reported last month that fourth-quarter profit plunged 14 percent from a year earlier as sales declined 4.7 percent.

Hewson said the Bethesda, Maryland-based company is increasingly focusing on international sales.

“We are on a path” to achieve 20 percent of sales internationally in coming years, up from 17 percent last year, she said. She cited Saudi Arabia, the United Arab Emirates, the U.K., Canada and Australia as countries that may help fuel such growth.

Asked if Edward Snowden’s revelations about the National Security Agency’s spy programs have hurt Lockheed’s international business prospects, Hewson said the company hasn’t faced any repercussion in its global business.

Protecting Data

Lockheed has a “very strong protocol” to protect its information from Snowden-type leaks and “we follow the U.S. government requirements and other agency requirements on how we protect data and how we protect our networks.”

While such U.S. requirements proved ineffective in stopping Snowden, Lockheed is satisfied “we’ve got a good counterintelligence-type mechanism within our company to address that.”

Even with growing cybertechnology sales, the F-35 remains Lockheed’s largest program, with revenue this year that may exceed the projected sales of each of the company’s other four business units, Hewson said.

The F-35’s domestic and foreign orders may translate into sales of as much as $7.8 billion this year, up from $7.24 billion last year, according to Hewson and Lockheed data. In 2013, F-35 sales accounted for half of the company’s aeronautics unit revenues.

F-35 Revenue

“The program itself is as big as missiles and fire controls or mission systems and training,” Hewson said of two units whose sales may be exceeded by projected F-35 revenue.

Those units are forecast to have 2014 sales of as much as $7.8 billion and $7.3 billion respectively, according to Lockheed data. Sales at the information systems and global solutions unit is projected to decline to a range of $7.55 billion to $7.85 billion in 2014 from $8.37 billion last year, according to Lockheed data.

The F-35 program is “going to continue to grow and become a larger element of our portfolio” if the Pentagon and international partners stick with their planned purchases, she said.

Pentagon officials said last year that they wanted to accelerate production to 42 F-35 jets in fiscal year 2015 from 29 each in fiscal 2013 and 2014.

While the jet’s orders are set to rise, software development has been lagging and the Pentagon’s weapons test office said in its latest report that the current version of software to go on the Marine Corps version of the F-35 may be 13 months behind schedule.

Software Testing

Lockheed will complete testing of the software, known as 2B, by December to field it on planes that are expected to be combat ready by December 2015, Hewson said.

The software “is planned to provide initial, limited offensive and defensive capabilities,” Jennifer Elzea, a spokeswoman for the Pentagon test office, said in in an e-mail. The computer code will be released for flight tests by June, she said.

Beyond the current generation of weapons, including planes, missiles and satellites, Lockheed is involved in research and development into three-dimensional printing, robotics, and advanced materials that “make systems lighter,” Hewson said.

One showcase for Lockheed’s research into lighter materials is the Sochi Winter Olympics in Russia, where U.S. speedskaters are sporting suits made by Baltimore-based apparel-maker Under Armour Inc., with technical help from Lockheed.

“I don’t know that we know a lot about speedskating,” Hewson said in an interview with Peter Cook of Bloomberg Television. “But we do know a lot about the way to use materials to help make them lighter.”

The new suits may help U.S. athletes take “time off of their time in speedskating,” she said.

Before it's here, it's on the Bloomberg Terminal.