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Textron Systems eyes rising foreign demand for drones, weapons

By Andrea Shalal-Esa

WASHINGTON (Reuters) - Textron Systems, a unit of Textron Inc , says strong demand from the Middle East and Asia for unmanned systems, ground vehicles and smart weapons will help expand foreign sales to about half of the division's total revenues in coming years.

Ellen Lord, president and chief executive officer of Textron Systems, said international sales had already grown to about 35 percent of total revenues from less than 10 percent in 2009, and would continue to expand toward a 50-50 split in coming years.

Textron Systems reported 2012 revenues of $1.74 billion, down from $1.87 billion a year earlier.

She said the company was actively pursuing new orders in the Middle East, North Africa and Asia with product demonstrations and by posting industry executives in target countries, including Saudi Arabia, the United Arab Emirates and elsewhere.

"We are being laser-focused on what opportunities we are looking at," Lord told Reuters Tuesday at the annual conference of the Association for Unmanned Vehicle Systems International.

Lord said Textron Systems was investing its own funds to continue upgrading the capabilities of its unmanned planes and other weapons systems, even as U.S. military demand declined in the face of mounting pressure on U.S. budgets.

Such work, coupled with international orders, would help Textron maintain hot production facilities for when the U.S. military services resumed their own orders, she said.

For instance, Textron invested heavily to develop a larger, longer endurance version of its Shadow unmanned plane that was demonstrated for Saudi Arabia in 2012, with an additional demonstration planned in Arizona this fall, Lord said.

She declined to give any details on the size of a possible Saudi order of the revamped plane, saying only that a contract could be completed some time next year.

Pentagon officials say funding for unmanned systems is down by about a third from its 2011 peak, but Textron and other firms in the sector see opportunities for more sales to foreign allies and civilian agencies in the United States.

"I see the opportunities for unmanned systems growing dramatically," Lord said, citing increasing demand for use of such planes for border security, local law enforcement, and for monitoring of wildlife, oil pipelines and other parts of the infrastructure.

Early steps to integrate small unmanned systems into the U.S. national airspace would also drive demand in coming years, Lord said, although she cautioned that such moves were a longer-term endeavor given resistance from some privacy advocates.

"Change is hard," she said. "It will be crawl, walk, run. As people ... have an opportunity to learn more, I think they will see the utility, see the economy. It's one step at a time."

Textron makes a small catapult-launched drone called Aerosonde and a larger 500-pound (227 kg) unmanned plane called Shadow. It also makes ground stations for the U.S. Army's version of the Predator drones built by privately held General Atomics, which should position the company well for the growing demand for universal ground systems that can control different types of aircraft, Lord said.

U.S. military officials told industry executives at the show that they were pressing for more work on such ground stations, and for better processing of data collected by drones.

Dyke Weatherington, the Pentagon's point man for unmanned systems, said the U.S. government was interested in promoting additional foreign sales of unmanned systems, but it was a complex undertaking, given the need to protect sensitive U.S. technologies, some congressional reservations about exports of armed unmanned planes, and missile control regulations that restrict sales of larger planes.

Despite those challenges, sales of smaller systems were easier to facilitate than the bigger Predator planes built by General Atomics and the Global Hawk high-altitude surveillance planes built by Northrop Grumman Corp , he said.

(Reporting by Andrea Shalal-Esa; Editing by Phil Berlowitz)

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