Sources inform ''Globes'' that Lockheed Martin Company (NYSE: LMT), the world's biggest defense company, will establish a development center in Israel. It will collaborate with Bynet Data Communications Ltd. in building the IDF Intelligence Corp's technology campus in the Negev, known as the 5/9 project.
Lockheed Martin knows the Israeli market well - the Air Force is preparing to receive its F-35 stealth fighter - but the company is now changing its approach to the local market. Israel is not just a loyal and enthusiastic customer of its planes and defense systems, but an arena for development activity.
A few weeks ago, the Ministry of Defense announced that Lockheed Martin and Bynet met the threshold conditions in the tender to build the 5/9 project's computing infrastructures, which is worth over NIS 1 billion. The Lockheed Martin-Bynet group is one of the five groups which passed the qualification stages of the tender. The Ministry of Defense will announced the tender winner at a later stage. The large amount and the activity at the heart of an important institution like the IDF required Lockheed Martin to rethink its opportunities in Israel.
Lockheed Martin VP global solutions Robert Eastman told "Globes", "The intention is to establish a local branch of Lockheed Martin in Israel in the field of information systems."
As part of the 5/9 project, Lockheed Martin will mainly handle migration, the adapting of lines of code written decades ago to modern computer systems. This process will sometimes be straightforward, but in other cases will require the rewriting of code. The development center will, over 20 years, provide support and maintenance services.
"We specialize in carrying out especially difficult migration to computer systems," says Eastman. "This requires us to be here, with the customers, every day. We have succeeded several times with this model in previous projects, and we intend to apply this model in Israel too. It includes the opening of offices, bringing in our workers, initially from other countries, hiring local workers, and cooperating with local companies."
Lockheed Martin expects to hire 100 Israeli employees for 1-2 years to set up the data center. The number of employees will drop to several dozen in the second stage, which will handle routine systems maintenance.
Lockheed Martin and Bynet founded a joint venture, LB Negev, for the 5/9 project. Bynet owns 51% of the venture and will receive a proportionate share of its income. Bynet CEO Alon Ben-Zur said that it approached Lockheed Martin because of the complexity of the project. "There is no Israeli company which knows how to do this. You need someone with experience," he said.
Bynet believes that the collaboration with Lockheed Martin could expand. The companies intend to submit joint bids in other tenders for the moving of IDF bases to the Negev. Despite the differences in size - Bynet has 400 employees compared with Lockheed Martin's 120,000 - the cooperation will be reciprocal. "Bynet can help Lockheed Martin in many other processes, including overseas," believes Ben-Zur.
Lockheed Martin is expected to post $45 billion revenue this year. Eastman's division, which will expand in Israel, is the second largest of the company's five divisions, with $8.9 billion in sales in 2012, 19% of total revenue. These numbers are big enough to make the defense company one of the world's ten largest computer services providers.
In addition to the moving of the IDF bases, Eastman says that Lockheed Martin is examining other opportunities in the Israeli market, especially in information security. "15 years ago, we decided to develop our own capabilities in this area, and we have a lot of know-how in analyzing cyber attacks to figure out what we're up against," he says. Lockheed Martin will try to use this knowledge to sell to Israeli water and electricity services providers, financial institutions, and retailers.
The know-how did not prevent hacking of Lockheed Martin's own enterprise network two years ago, following the theft of encryption systems from RSA. Eastman says, "We have millions of attempt to hack the network every day."
A company source claimed that the attack was blocked before it reached "real targets", i.e. intellectual property. In Lockheed Martin's case there is need for extensive defenses, as the world's biggest defense contractor, which is a party to classified information from armies from all over the world, and which is engaged in the design of the world's state-of-the-art combat planes, such as the F-35.
Eastman said, "We have about 30 attacks targeting us per day."
Will Lockheed Martin's involvement with Israel include acquisitions? He said, "Our plan is to establish a business that will look at the range of opportunities that we have here. One of the options is to make acquisitions but we are very cautious about such actions. As part of creating our presence here we will look for M&A opportunities but that will only be an additional activity. The main thing is to bring our capability. The move to the south is most attractive for us because of its complexity. And we can really help on this."
Lockheed Martin is no newcomer to the Israeli market. The company has been one of the biggest suppliers to the Israel Air Force long before Lockheed merged with Martin in 1995 to create today's giant.
Published by Globes [online], Israel business news - www.globes-online.com - on June 4, 2013
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