Saudi Arabia Pays Raytheon for Air Defense Improvements

by: Matthew Potter
June 24, 2011

Category: Editorial | RSS 2.0

The various oil rich Gulf States have proven to be good markets for the U.S. as well as other defense contractors. In the last ten years especially nations like Saudi Arabia, the U.A.E. and Qatar have invested billions in significant technology upgrades and equipment. Much of this spending has been concentrated on improving their air and missile defense due the threat from Iran and other “rogue” states with some ballistic missile capability.

Both the U.A.E. and Saudi Arabia have invested in ground based systems based on the U.S. Army’s PATRIOT missile. This utilizes a radar by Raytheon (RTN), missiles made either by that company or Lockheed Martin (LMT) as well as command-and-control capabilities. Sales have been in the billions of dollars helping both companies but especially Raytheon who produces the majority of the system.

The expected decline in U.S. and European defense spending will affect these companies bottom line and Raytheon in its most recent quarter did see some warning signs of drops in revenue and earnings. Contracts with overseas customers can help offset these cuts and buoy the defense contractors.

Raytheon has announced several contracts latelywith customers in the Persian Gulf including a PATRIOT one with Kuwait and a large order from Saudi for guided bomb kits. Those were worth well over $600 million but they pale in comparison t the one announced this week.

Saudi Arabia has awarded the Massachusetts based company a contract to upgrade their air defense system worth almost $2 billion. The contract calls for the Saudi military to receive a newer overall version of the PATRIOT system and includes hardware, training and engineering support.

The U.A.E. recently purchased PATRIOT and has also asked for Lockheed’s longer range THAAD system to provide better missile defense. THAAD utilizes a Raytheon radar and Lockheed missile like PATRIOT PAC-3 and there is a potential that Saudi Arabia could follow to get a longer range system. Further investment of this type will only benefit U.S. defense contractors.

Photo from expertinfantry’s flickr photostream.

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