This Profit Play Will Help Thwart the China Sub Threat

10 | By Michael A. Robinson

I’ll never forget my conversation with defense-industry leader Bob Beyster.

Armed with a doctorate degree and decades of experience, Beyster ranked as one of the U.S. defense industry’s true visionary thinkers. That came through loud and clear when I interviewed him for Signal magazine back in early 1999.

Beyster could talk with ease about everything from the impact of the dot-com boom of the 1990s to the future of information technology at the Pentagon.

This University of Michigan-educated scientist was a walking, talking encyclopedia of global tech trends. He gave me loads of insight into the major shifts that would reshape our world far beyond defense – from changes in telecommunications to how the Web would slash business costs for thousands of global firms.

With fond memories of that chat, I have been a faithful follower of the groundbreaking company Beyster founded some 35 years ago.

I’m referring to Science Applications International Corp. (NYSE: SAI), now headquartered in McLean, VA.

That’s why I was glad to learn recently that SAIC is taking a leadership role in a major defense trend – unmanned vehicles, usually referred to as drones. SAIC is helping the Pentagon pioneer underwater drones that can detect a new generation of ultra-quiet diesel-electric submarines that threaten U.S. security.

In a moment I will share those details with you.

But first, I want to make sure you know why I spend time talking to senior leaders like Beyster. See, these guys are not only big thinkers driving the Era of Radical Change, but many of them are also profit machines.

They often define U.S. entrepreneurship – the unique quality that makes America the perennial leader in global high tech … and in the creation of wealth for its free-market investors.

An entrepreneur himself, Beyster is known for taking two bold management steps.

First, he laid the groundwork for employee ownership of a publicly traded firm. That may sound like an inherent contradiction. But not the way Beyster did it.

At the time I talked with him, only the employees could own stock in SAIC. Beyster stands out today as a leader in pushing the concept of employee-owned firms. After he retired as CEO, the company launched an IPO, and its shares are publicly traded still. (In fact, to better focus on a changing market, SAIC later this year plans to split into two publicly traded firms.)

Second, Beyster became the ultimate change agent. He created an atmosphere that catered to entrepreneurs – which turned SAIC into an incubator for innovation. Indeed, many of Beyster’s “employees” went off to start their own firms.

Between 1975 and 2003 – the 18-year stretch for which Beyster kept records – roughly four dozen alumni started new companies.

No doubt, most never became household names. You likely never heard of Michael A. Chipman. Fact is, he created a little software package called TurboTax.

Shortly after going public in 1993, Intuit Inc. (NasdaqGS: INTU) acquired that firm – and has gone on to return roughly 2,600% to investors.

In 2004, Beyster retired from the company he’d founded back in 1969, at the height of the Vietnam War. But his focus on making sure that SAIC would remain a technical leader lives on today.

That’s clear from the recent news that the mid-cap firm just got a key “drone” contract with DARPA, the Pentagon’s research unit.

These days, most drones are airborne, and are known as “unmanned aerial vehicles,” or UAVs. They represent a major trend toward pilotless military planes.

But under a contract worth at least $58 million, SAIC will build and test an unmanned underwater vehicle (UUV) with a very special purpose.

Simply put, DARPA wants a robotic anti-submarine vehicle – a “sub-hunter” drone that can operate for extended periods, and cover thousands of miles of ocean as it does so.

You see, China, North Korea and Iran between them now have 73 diesel-electric “boats,” as they’re known in military parlance. About half are the new, super-quiet subs.

And more are on the way.

In an era in which ultra-modern nuclear subs get all the headlines, here’s a stunner: Diesel-electric technology – which dates back to the late 1920s – is one of the biggest sources of worry in the Pentagon’s shadowy corridors.

And for good reason. The propulsion systems of these boats are nearly silent. Diesel-electrics run on big diesel motors when running on the surface, but switch to batteries when submerged.

That power system is nearly silent, making it the perfect design for the shallow waters just off our coastlines.

These submarines also possess the “passive” sonar systems that make it possible for these submarines to sit and listen, submerged and quiet, just off our shores.

It’s a nasty package, and one that can’t be ignored: We don’t want the silent subs of our enemies to be able to launch a first strike on the U.S. from as little as a mile away.

I believe this technology is vital, and the sooner we field these drones, known as ACTUVs, the better. It will give us an edge over China – we’ll be able to find their quiet subs long before they can find ours, shifting the balance of power back to the United States.

There’s a fitting synchronicity to this DARPA award, for it means that SAIC has come full circle: Beyster served as a naval officer during World War II and later did scientific research that helped develop our nuclear subs.
America is much better off today because of Beyster’s contributions and long service. And the looming two-way split-up of the company he founded will undoubtedly touch off an entirely new cycle of wealth-creation.

We’ll keep you posted. After all, that’s precisely the kind of opportunity we look for … here in the Era of Radical Change.


10 Responses to This Profit Play Will Help Thwart the China Sub Threat

  1. Andrea says:

    even though i abhor war and death, it is crucial we know how to thwart hostile actions against us , This Scientific way of approach is the epitome of “hands off” war fare. I like that , I know that soon fist to fist combat will be archaic and totally out of style , the ” war” or spying , will be totally a joystick act , not unlike a video game but where stakes are real. this science will develop rather rapidly , i feel old fashioned weaponry is out! ,tomorrow scientific “attack” will be one of joystick and satellite relay , kind. But science is leading the way to almost ” unrecognizable attendance ” .to affairs not invited to . I will watch and take action soon in this “play”.

  2. Anonymole says:

    Say you have an area to protect. Is it better to hire a bunch of guards or set up a fence? Or combination of both? Guards can be tracked. Fences can be breached. Guards require constant management and replacement, fences require maintenance. Guards are fallible, fences less so. But guards can be unpredictable, fences not at all.

    I’d have to think that a fence of sonar buoys, much like NOAA’s wave and ocean monitoring buoys as well as a few, unpredictable sub hunters might be best.

    I also have to question why a sub hunter has to be a sub itself. Right now the military hunts subs with ships and helicopters. A cadre of small, unmanned vessels, solar/diesel powered, towing sonar equipment, would be less costly and just as useful as a full on ACTUV.

  3. bill goodrich says:

    Schwab has no record of any NYSE listing for SAIC…
    It turns out the listing is SAI…
    Thanks for the interesting articles…I read all of them,,

  4. DaveN says:

    SAI — one to watch not a killer drone just a leech via a magnetic field a tracking device with enought explosives to self destruct if disturbed. What is in the pipline for the spinoff?

  5. Rod Northover says:

    I have never served on a submarine,but I would rather fight what can be seen than the unseen.
    I believe that whoever controls beneath the waves can control the world.
    There has to be the money to produce the weaponry so that will dictate who has the potential for the power.
    Sadly there will always be money for weaponry
    The money would be better spent on our childrens positive education

  6. F.Brown says:

    Damn, I only just got my drone tracking equipment set up, now I have to worry
    whenever I’m in the bathtub!!
    When will it ever stop???

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