Investopedia: Sequestration - What Will It Do, And What Should You Do?

With the deadline having come and gone with no real action from Congress, sequestration is now the reality of the U.S. economy. Originally designed as an unthinkable, unacceptable, avoid-at-all-cost-because-it's-too-horrible-to-contemplate “trick,” in order to force Congress to negotiate and achieve long-term plans for a better balance between spending and revenue generation (taxes), Congress instead decided to think the unthinkable and let it happen.

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Financial Edge: The Reality Of Investing In Space Exploration

Space exploration has long been one of those endeavors that many try to argue has to be the domain of national governments. Not only does space exploration carry a huge price tag and uncertain economic returns that are anathema to companies, but many pundits and observers have worried that their involvement will somehow sully the virtues of pure science and/or lead to unrestrained land-grabs that will be hard to adjudicate in on-the-ground courtrooms.

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Investopedia: Greece - Of Banks And Tanks

The great thing about reality (at least for a writer) is that it has this way of going in directions so strange that not even fiction writers would dare attempt. If recent news out of Greece is to be believed, the Greek government has pulled a whopper - ordering some heavy-duty military hardware at a time when its largest European creditors are debating just how far they should push their own citizens to float this bankrupt nation. (For more on Greece, read 5 Reasons You Should Care About Greece.)

Tanks, with a Side of Skepticism  
Word broke yesterday morning that the Greek and U.S. governments have apparently reached agreement on a deal that will "grant" up to 400 Abrams tanks to Greece, along with a host of refurbishments and upgrades. Investors should realize that the sourcing on this is hardly airtight - the sources include Svenska Dagbladet and other less-than-regular outfits like Defencegreece.com and Hellenic Defence & Technology. Accordingly, this could be a hoax or old news made to seem new again, and it is worth noting that there aren't any corresponding entries in the Federal Register yet.

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Investopedia: SRA Today, CACI Tomorrow?

Acquisition announcements on Fridays are a bit rare, but that was about the only really surprising part of the announcement that IT services provider SRA International (NYSE:SRX) was taking a bid to sell itself. What may be more interesting for investors, though, is the speculation as to whether SRA will get a competing bid and/or whether other leading IT service companies may see a revaluation of their shares.

SRA - A Solid Bid at Last
There have been rumors for a little while that SRA was attracting buyout interest. There was a rumor back in January that Britain's Serco had offered $2 billion, and the company has basically been in play ever since. Those rumors came to some fruition with the announcement Friday that the company had accepted a bid from Providence Equity Partners for $31.25 a share in cash, or a total deal value of $1.9 billion.

At $31.25 a share, Providence is giving shareholders a 10% premium to Thursday's closing price and more than a 50% premium to the price before the deal speculation really got going. Like the eBay (Nasdaq:EBAY) deal for GSI Commerce (Nasdaq:GSIC), this offer is including a 30-day go-shop period; likely in the hopes of de-fanging the ambulance-chasing class action suits that seem to be popping up these days whenever a deal is announced. (For more, see Is eBay Looking At GSI Commerce As Another PayPal?)

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An Intelligent Deal For Raytheon

The unpredictable and highly political nature of defense and intelligence spending make it difficult for small, publicly traded defense companies to really thrive. It is not all that surprising, then, that there has been a wave of M&A in the space - not only due to the increasing significance of electronic warfare and the need for bigger companies to add technology, but also the increasing uncertainty of spending in the face of higher deficits and debts.

With all that in mind, then, it is not surprising to see Monday's announcement that Raytheon (NYSE:RTN) reached a deal to acquire Applied Signal (Nasdaq:APSG). (For background reading, check out the Mergers & Acquisitions Tutorial.)

The Scoop on the Deal 
What is a surprise is that Applied Signal's management essentially put itself on the block back in October of this year. This is surprising because the company's management had not been very warm to the idea of a sale for many years. With that change in attitude though, things moved quickly.

Raytheon, one of the largest defense companies in the world, announced that it would acquire Applied Signal for $490 million in an all-cash deal that values Applied Signal at $38 per share. That is not only a 9% premium to the stock's closing price on Friday, but also a 90% premium to where the stock traded before management publicly discussed the possibility of a sale.

All in all, this is an eminently fair deal for Applied Signal shareholders. Relative to deals like Boeing (NYSE:BA), which bought Argon ST; Northrop Grumman (NYSE:NOC), which bought Essex; and FLIR (Nasdaq:FLR), which acquired iCX Tech; if APSG goes out at more than 15 times its trailing EBITDA, it's a fair price.

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Can Boeing Afford More Delays?

Patience in a funny thing. Everybody wants a job to be done right, but they also want it done on a timescale that at least approximates the original estimates. Customers appreciate that Boeing (NYSE:BA) is attempting to do something quite extraordinary with the 787 Dreamliner project, but if the company cannot ever deliver the plane, who cares how amazing it is? 

More to the point - is Boeing running the risk of giving unintentional aid and comfort to emerging rivals? Should investors worry that Boeing's scale and technical expertise may all go for naught because the company was too ambitious and customers ultimately settle for lesser planes that rivals can actually deliver?  

More Problems ... Again
Boeing has had no shortage of problems with this new 787 plane. Problems with the Rolls Royce engine (one of the two available; the other being offered by General Electric (NYSE:GE)) got a lot of attention, and now Boeing has suspended test flights after an onboard electrical fire. While the company has not formerly altered the expected initiation of deliveries in the middle of the first quarter of 2011, the Dreamliner is already three years behind schedule and more delays seem more likely than not.

Of course, these delays need to be kept in perspective. There has never been a plane quite like the Dreamliner, and the scale of the engineering challenges are enormous. On top of that, these planes may spend well more than 30 years in service and it is clearly important to get everything right ahead of time.  

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