In May the U.S. Army CECOM (Communications Electronics Command) awarded a $19 million dollar contract for its BA-5390/U battery, which is a primary (nonrechargeable) lithium/manganese dioxide battery. In June, an order for $2.7 million was received from two of its U.S. Battery distributors for the battery with the same model number. This battery has more than 70 military applications in the U.S. Armed Forces. Ultralife is heralding its day in this hot summer’s sun with a rise in stock. Since December 2002 it has announced military contracts every month, except January 2003. These military contracts are having positive effects on company growth. Positive comments from the financial analysts such as Jim Oberweis, who oversees three mutual funds and is editor of the Oberweis Report investment newsletter, have enhanced the company’s image. Mr. Oberweis stated, “Their business has picked up a lot because of military contracts. Sales were up 20% last year....the stock is cheap relative to the growth rate.” Ultralife’s chief financial officer, Robert Fishback, expects that military contracts will make up 50% to 60% of the revenue for this year. CEO John Kavezanjian also stated that military business continues to drive Ultralife’s growth.
Military markets for U.S. Companies
Because of terrorism., the heightened security alerts and the war with Iraq, the U.S. is looking for more power devices for the armed forces and homeland security. The Department of Defense is looking toward U.S.-based companies as suppliers. On May 23rd, David Kurzman, an analyst at H.C. Wainright & Co., commented on Ultralife’s significant gain in military contracts and stated “...the (U.S.) military wants to keep suppliers U.S.-based.” (Quote is from “Batteries Not included” by Lawrence Carrel, , Yahoo News, 05/23/03.) Ultralife is based in the U.S; its headquarters and primary manufacturing and R&D facility are in Newark, New York, near Rochester. (The Company also maintains a production and R&D center in Abingdon, England, near Oxford.)
One of Ultralife’s keen competitors has been SAFT, a large battery manufacturer headquartered in France. In late May thisCompany announced it had delivered its one millionth BA5560 Battery to the U.S. Military since it began receiving contracts at the end of 1999. SAFT states in its press release of of 05/29/03 that its battery is “...the main source of high performance lithium batteries for U.S. solider during the current action in Iraq. (Ed note: It is ironic that Saft, headquartered in France, a country that vehemently opposed the U.S. and the Iraq war, would be a U.S. military supplier for American troops.)
But, things are changing. Americans are buying less of what France has to sell. According to the Wall Street Journal (“U.S.-French Rift Hits Bottom Line” by John Carreyrou and Jenny E. Heller on 06/156/03, p.A13) “French exports to the U.S. fell 17.2% for the three months from February to April with the same period last year, according to the French customs service.” On June 15th at the Paris Air Show, the U.S. Defense Department made a cut in its number of representatives. The CEOs, who would normally attend the show from U.S. based companies such as Boeing, Lockheed Martin, Raytheon and Northrup Grumman, were absent.
Meanwhile, Ultralife is most pleased about getting military contracts for batteries. Later this year, the military will announce the chosen company for the large cylindrical batteries. Will Ultralife win again? H.C. Wainwright has an answer, “...It (Ultralife) beat out Saft, the big guy, for the small batteries, and the military wants to keep suppliers U.S.-based.” (Second quote from article, “Batteries Not included”)
Other U.S.-based suppliers
Ultralife is not the only “lithium battery company” in the U.S. selling to the military. Valence Technology, a NASDAQ listed stock with its world headquarters in Austin, Texas, also designs and supports military battery development; the company has provided Lithium-ion batteries for a variety of military applications such as in satellites, telemetry and submarines. Privately- held entities such as Yardney Technical Products/ Lithion (subsidiaries of Ener-Tek International) offer expertise in research and development and have recent contracts with agencies as the U.S. Air Force and NASA. Eagle Picher Techologies of Joplin, Missouri, which has powered the space program for the past several decades with its Nickel-hydrogen batteries, is now applying its major efforts for contracts with the military and space using various Lithium-based technologies. EaglePicher Technologies is asubsiadiary of privately held EaglePicher, Inc. which is headquartered in Phoenix, but its principal stockholder, Granarai Holdisn BV is a Dutch conglomerate.
However, it is a global economy, so although all of the above mentioned companies have headquarters in the United States, some of the battery cells, battery packs and/or electronics utilized may not be manufactured in the U.S. Business economics dictate cost effective manufacturing and alliances which enhance product offerings and markets. For example, last March under a new collaborative agreement, Valence announced the Sinbon Electronics will design and assemble at its Taiwan facilities the Saphion Lithium-ion batteries developed by Valence Technology. In June, Eagle-Picher Technologies announced it had signed a supply agreement with GS Battery (U.S.A) Inc., a wholly owned U.S. subsidiary of Japan Storage Battery Company. GS will supply their advanced large (50-190 Ah) Lithium-ion cells and Eagle Picher will use its packing expertise to produce batteries which focus on military and other applications.
Although Ultralife has production capabilities in the U.S. and the UK, it also has Ultralife Taiwan, Inc. (UTI), which is a venture between Ultralife and PGT Energy Corp. Last October, Ultralife raised $2.4 million from the sale of Ultralife Taiwan, Inc.’s shares and retained a 10.6% ownership interest. In addition, over the next 3 years, Ultralife will have reserved access to 10% of UTI’s volume capacity for rechargeable lithium battery products and the rights to utilize UTI’s Large Scale Battery technology for the production of large capacity Lithium-ion batteries for government and miliary markets in the U.S. and the U.K.
So, what is the point of mentioning global involvement? Even if the U.S. military is giving primary consideration to U.S.-based companies to provide batteries; there are few situations where battery cells, packs and/or associated control electronics are all designed, manufactured and assembled here in the U.S. Thus, with the existence of terrorism, the need for homeland security, and the changing political positions of various nations, any involvement of companies from foreign nations in the chain of battery development/production for electronic devices for military and security purposes must be an important consideration.
Editor’s note: The editors of Batteries Digest have no financial interests in Ultralife or any of the companies mentioned in this article.