Byron Callan

Byron Callan

Contributing columnist Byron Callan is a director at Capital Alpha Partners in Washington.

Articles
Opinion: Why The Defense 'Upturn' Is A Mirage
New program starts are going to be extremely hard-fought and without increased budgets, and extensions of mature lines also may be more difficult.
Opinion: Cheaper Oil’s Winners—and Losers 1
Like most abrupt macroeconomic changes, there are mixed implications for the defense sector from the recent drop in oil prices.
Opinion: Plenty Of Risk Remains For The F-35 Program  11
There shouldn’t be much doubt that the F-35 program is making progress, but the larger questions remain.
Opinion: U.S. Company Shares Generally Doing OK 
Defense stocks are traditionally thought of by investors as defensive.
Opinion: NATO Summit Marks Base For Defense  1
Getting Europe to increase support for NATO is easier said than done
Opinion: Political Dust May Cover Defense Innovation 1
Defense cultural change needs to earn support
Opinion: More Pressure On Margins Likely By 2020
Record-high operating profit margins being reported by U.S. defense prime contractors could be sustained for another year, perhaps even three, but later this decade and into next, margins may come under pressure. Of course, this has to be considered on a company-by-company basis, but there are some broader changes to consider
Shock Therapy For Slow Weapons Development Programs?
More capable adversaries could jolt lengthy weapons development
Why Defense M&A May Wake Up
Does a different backdrop foretell a revival of defense deals in 2014?
Defense And Industry Need New R&D Resources 

While there is plenty to debate about where U.S. defense budgets could settle in 2014-15, there is no debate about the Pentagon's desire to continue to compete with cutting-edge technology. It expects defense advantages to be sustained through investment in new weapons and support systems that provide a generational lead over those fielded by adversaries.

How The U.S. Should Watch Its Technical Back 

The Center for New American Security (CNAS) recently released a report entitled “Game Changers: Disruptive Technology and U.S. Defense Strategy.” That study considered additive manufacturing (3-D printers), autonomous vehicles, directed energy, cyber capabilities, human performance modification and other emerging technologies that the center believes need to be factored into U.S. security policy and planning.

How Defense M&A Could Emerge From Its Slumber 

Mergers and acquisitions (M&A) activity in the defense sector has been at a standstill in 2013 in the over-$100 million category. There have been several noteworthy commercial acquisitions announced by companies with defense operations: Rockwell Collins said last month it is buying Arinc from Carlyle, and Alliant Techsystems is purchasing Caliber Co. from Norwest Equity Partners and Bushnell from MidOcean Partners. But heading into September, the number of defense deals with prices in excess of $100 million is easy to add up: zero.

Why Rising Profit Margins Should Be A Worry 

U.S. defense primes are reporting impressive second-quarter earnings. General Dynamics, Lockheed Martin, Northrop Grumman and Raytheon all raised guidance for 2013, and their stock prices responded favorably. The bite of sequestration—automatic, across-the-board cuts in the Defense Department's budget—has initially proved to be not as harsh as was expected earlier in the year, and operating profits are benefitting from cost-cutting. Shareholders adore the primes' share repurchase

Defense Budgets, Stocks Head In Opposite Directions 

The automatic U.S. budget cuts known as “sequestration” went into effect on March 1, but the sky has not fallen as far as investors and traders are concerned. There is no pure defense stock-price index but shares of the largest U.S. defense primes have outperformed both the S&P 500 and Dow Jones Industrial Average since March 1. Small and mid-size stocks have also performed well and even the major U.S. defense services contractors—Booz Allen, CACI, ManTech and SAIC—have seen their shares appreciate more than broader market indices.

The Wrong Way To Look At U.S. Defense Spending 

As he was recently discussing the pivot of U.S. strategic emphasis to the Asia-Pacific region, Deputy Defense Secretary Ashton Carter repeated an assertion that the U.S. spends more on defense “than the next 16 largest militaries combined.” While Carter's talking point is more or less technically correct, such a comparison does not indicate what an appropriate level of spending should be. A more useful way to think about U.S.

 
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