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Terrorists scored a direct hit on the American economy, sending it spiraling into recession. The nation's defense contractors are a rare bright spot, with the stocks of many soaring by nearly 30 percent in the past month. Analysts are predicting that the defense budget will increase 66 percent to $500 billion by 2005. But the military build-up won't follow the old formula of cranking up production of tanks and battleships. In the war against terrorists, it's software engineers who are the architects of the Arsenal of Democracy. In a flurry of phone calls since the attacks, military procurement officers are asking contractors to accelerate delivery of high-tech spy devices, deadly satellite-guided weapons and sophisticated communications systems. Military suppliers call it "network-centric warfare." The goal: to provide equipment that can find and destroy the enemy in a matter of minutes, rather than hours or days. And the companies that provide such technologies will ultimately win the most defense dollars. Some are smaller players, like L-3 Communications, which makes secure telephone equipment and navigation systems. But old warriors like Raytheon, General Dynamics and Northrop Grumman are also changing with the times and going digital. "It's not Rosie the Riveter anymore," says Merrill Lynch defense analyst Byron Callan. "It's Suzie the Software Engineer." Indeed, refugees from the dot-com meltdown are seeking a haven in the military economy. Boeing and Raytheon have hired thousands of programmers in the past few years.
Even the humble helmet, largely unchanged since the Battle of Troy, is going high tech. It's now part of the "Land Warrior" system, which comes complete with built-in video camera, night-vision goggles and a microphone for voice communications. The helmet is also linked to a Global Positioning satellite which displays a soldier's location, as well as the whereabouts of other American troops, and suspected enemy positions. The information is all beamed back to battlefield computers, allowing commanders to monitor troops and see what they are seeing simultaneously. To keep costs down, the components of the Land Warrior program run on standard Intel Pentium processors and Microsoft Windows software. Even the Land Warrior's rifle is equipped with special sensors that see through smoke, foliage and darkness. This gear, still in the prototype phase, is expected to be used by the Special Forces ground troops in Afghanistan. "We will use highly trained Special Forces with digital capabilities for knowing where the enemy is," says Jon Kutler, a former Navy officer who is now a defense analyst with Quarterdeck Investment Partners.
Much of the existing arsenal is getting 21st-century re-engineering. The smart bombs of the gulf war are being upgraded to "brilliant weapons" that fly faster than a bullet and hit a target within 10 feet. Raytheon, maker of the Tomahawks now being fired on Afghanistan, is retrofitting 624 of the cruise missiles with satellite-guidance systems. An even more advanced Tactical Tomahawk coming in two years will be able to change course in midflight and even "loiter" over targets, doing lazy figure-eights in the sky, while it waits for exact coordinates. Big old iron "dumb bombs" are also getting smart-er by having satellite-guidance systems clipped to their tails.
It's not just the weapons that are being overhauled. The defense industry has remade itself in the last decade. When the cold war ended and the Clinton administration slashed defense spending, the industry began a massive consolidation that continues today. General Dynamics, best known as a maker of tanks and submarines, recently acquired GTE's and Motorola's wireless defense systems, which allow unmanned spy planes to instantly beam information to the ground. Northrop Grumman transformed itself from a free-spending defense contractor into a high-tech company specializing in information technology, precision-guided weapons and the maker of futuristic unmanned spy planes like the Global Hawk. "That is the direction the world is going," Northrop Grumman CEO Kent Kresa told NEWSWEEK. "The computer chip will be a dominant factor in future warfare." In fact, the Pentagon's new battle cry seems to be "Lock and download."