Lockheed's blueprint for change in the system and itself

Lockheed Martin's knowledge of how defense acquisition works is self-evident but its chief executive believes many of those processes need to be modified for customers to get the technologies they want when they want them. So too should Lockheed change, he told Wall Street.

One big reason behind how Lockheed Martin became the world’s largest defense company was having a near-full understanding of the regulatory and acquisition processes that govern how the sector operates.

The company also wants to work with government customers on modifying those rules of the road in the name of speed and capability. But during Lockheed’s first quarter earnings call with investors Tuesday, CEO Jim Taiclet said his company also wants to be more creative with its technology and business approaches.

Lockheed’s partnership with commercial satellite outfit OmniSpace announced in March is one example of what Taiclet spoke of. The companies will work on developing a 5G communications network that would use both satellites in space and terrestrial networks on the ground, but letting users switch the network they use without changing their devices.

While Taiclet touted to analysts Lockheed’s core competency of regulation know-how, he also outlined how his company wants to “be that bridge to commercial technology” for government customers to get those tools.

“We can license with them on one hand, the way they’re used to working, and we’ll deal with the federal government as far as the contracting goes on that side,” Taiclet said. “We really intend to partner with these leading companies in the telecommunication and technology space because we need as a defense enterprise to accelerate our adoption of those 21st century technologies and capabilities.”

But to be that pivot point, Taiclet said Lockheed will also have to show an interest in how procurement processes and the pace of them change in ways the commercial companies it wants to partner with are used to.

Taiclet said the intelligence community has a model of this, where some budgets at the national intelligence director’s level have “more flexibility than a standard Department of Defense budget line.”

“Ultimately we’re going to have to have an ability to work with our customer base to have new acquisition and appropriations processes so that we can speed things up and get things done faster in the world we’re talking about,” Taiclet said.

One big imperative to make all of that come to fruition for Lockheed, the industry as a whole, and the customers they work with is what has been among Taiclet’s favorite subjects to speak about since he became CEO last year and unveiled his agenda.

“It’s imperative we establish a 5G.mil network architecture, something that is a standards-based architecture with interfaces (and) frequencies,” Taiclet said.

“We’re going to use bands, we’re going to employ ways to do hierarchies and use intellectual property from numerous companies inside the defense enterprise to actually create an architecture just like you see being done say in 5G and the telecommunications world.”

In the meantime, Lockheed reported first quarter revenue growth of nearly 4 percent over the prior year period to $16.3 billion with all four business units seeing sales increases. Net profit for the quarter climbed 7 percent year-over-year to $1.8 billion.

The company also raised its sales outlook for this year to $67.3 billion-$68.7 billion.

As for Lockheed’s other main item on its agenda: the company is holding to its expectation that the pending acquisition of Aerojet Rocketdyne will get all the way through the regulatory review process by the second half of the year.