Teaching Old Defense Dogs New Tricks

Teaching Old Defense Dogs New Tricks<@VM>TechToon

Steve LeSueur

It's déjà vu all over again.

Defense contractors are looking to "commercialize" some of the exotic, government-funded technologies they created for military services and intelligence agencies. Titan Corp., for example, has developed a food pasteurization process that has its roots in research the company did for the Strategic Defense Initiative during the 1980s. Lockheed Martin Corp. has taken radar technology that it built for the Army's Apache attack helicopter and developed it into a broadband networking device.

Jon Kutler, president of investment banking firm Quarterdeck Investment Partners, is skeptical. His company tried the technology transfer business in the early 1990s without great success.

"The press tends to make a big deal out of the few successes there are, but this is very hard to do," he said.

But some companies have a new plan. Recognizing that old-line defense companies may not be well-suited to competing in the commercial arena, many now are licensing their technology to start-ups in exchange for equity stakes in the new companies. Others are bringing in entrepreneurs from commercial markets to start subsidiaries that can be spun off as independent companies.

"Once we make the decision to build a commercial business, we go to the outside and bring in a management team that comes from that specific commercial industry," said Gene Ray, Titan president, chairman and chief executive. "Being great at selling into one industry doesn't necessarily help with another one."

Ray and executives from other defense companies talked with Nick Wakeman, Washington Technology's senior editor, and told them about their plans to develop commercial uses for their defense technologies. You can read Nick's story on this issue's front page.

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