General Dynamics makes cybersecurity products acquisition

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Falls Church-based General Dynamics Corp. (NYSE: GD) is growing its cybersecurity product line, announcing Tuesday that it had purchased a cyber products division of Phoenix-based Advatech Pacific Inc.

Through this acquisition, General Dynamics will add Advatech’s TACDS and CenturionCDS products. Terms of the deal were not disclosed.

TACDS is a small, rugged device outfitted to military vehicles, ground systems and aircraft that allows for the automated exchange of sensitive, tactical information from the battlefield. CenturionCDS, similarly, is a device that transfers secure data and is typically equipped to deployed soldiers’ communications and computer equipment as well as small drones.

General Dynamics’ current family of cyber products are a part of its mission systems division, which is included in its information systems and technology business. More specifically, cyber products are part of its mobile communications and intelligence, surveillance and reconnaissance (ISR) solutions group. The portfolio includes a number of products aimed at protecting sensitive data and ensuring secure communications.

General Dynamics’ IS&T division differs from other IT services businesses in the industry in that it includes a large hardware component— primarily communications devices used in-theater.

Because of its large mix of products, General Dynamics’ IS&T business enjoys high operating margins as products are typically more profitable than services. Throughout 2016, the company was able to offset losses in its IT services work with increases from its Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance (C4ISR) products division.

In the last six months of 2016, C4ISR product revenue grew $352 million over the same period last year — whereas IT services fell $107 million. C4ISR was bolstered largely from orders under its Warfighter Information Network-Tactical program delivering communications hardware to soldiers.

The first quarter of 2017 marked what could be the beginning of a troubling trend, as C4ISR product revenue was down $98 million compared to the same quarter last year, and IT services fell $84 million. Company executives blamed the slowdown on the transition to the administration of President Donald Trump.