Northrop Grumman Corporation
) has closed the acquisition of M5 Network Security Pty Ltd. for an
undisclosed amount. Canberra, Australia-based, M5 Network Security
Pty Ltd. provides cyber security and secure mobile communications
products and services.
M5 Network Security endows Australian military and intelligence
organizations with advanced analytics. The acquisition would
enhance Northrop's Australian market exposure in the fields of
cyber security and communication solutions.
The aerospace companies seem to be involved in acquiring companies
that provide cyber security tools and services. Recently, one of
the company's peers
General Dynamics Corporation
) also completed the acquisition of Fidelis Security Systems, Inc.
Fidelis is a market leader in cyber security tools that provide
real-time network visibility, analysis and control. Its network
security solutions assist customers in preventing advanced threats
and data breaches.
Northrop Grumman is a leading global security company providing
innovative systems, products and solutions in aerospace,
electronics, information systems, and technical services to
government and commercial customers worldwide. At the end of the
second quarter of 2012, cash and cash equivalents were $3.1
billion, up from $2.8 billion in the second quarter of 2011. Cash
provided by (used in) continuing operations during the quarter was
$876 million versus ($34) million in the year-ago period.
Going forward, Northrop Grumman's strong balance sheet and cash
flows provide substantial financial flexibility and a cushion for
improving shareholder value through incremental dividend, ongoing
share repurchases and earnings accretive acquisitions.
Recently, the company had also authorized an increase in the
company's outstanding share repurchase authorization to $2 billion
of common stock. As of June 30, 2012, Northrop Grumman had 248
million shares outstanding and $1.1 billion remaining under its
share repurchase authorization.
Moreover, Northrop has a strong presence in Air Force, Space &
Cyber Security programs. Revenue and earnings growth continue to be
driven by its strong presence in the current focus areas of cyber
security, modernization of defense and homeland security assets,
intelligence, surveillance and reconnaissance systems, advanced
electronics and software development.
However, we expect these positives to be offset by apprehension
regarding defense cutbacks on high-cost platform programs,
over-exposure to the DoD budget, lower backlog, cost over-runs and
reductions in the Afghanistan and Iraq operations. The company
presently retains a short-term Zacks #3 Rank (Hold) that
corresponds with our long-term Neutral recommendation on the
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