updated 3/28/2008 6:46:36 PM ET 2008-03-28T22:46:36

Lockheed Martin Corp. beat out Boeing Co. to win a $766.2 million Pentagon contract to design and build a radio system connecting aircraft, ships and ground stations militarywide.

The deal, announced late Friday, could lead to the installation of tens of thousands of radios and ultimately be worth billions to the company.

The award is a key piece of the Joint Tactical Radio System (JTRS), a major Defense Department program to replace much of the military’s existing radio equipment with radios that will let Army, Navy, Air Force and Marine troops communicate. The new system will be able to transmit video and other data and as well as conversations.

Loren Thompson, a defense analyst and consultant based in Virginia, says different branches of the military purchased so many different radio systems on a haphazard basis that many of the radio systems are not compatible — or “interoperable.” In some cases, he noted, military radios cannot communicate with other radios inside the same service.

There are at least two dozen types of incompatible radio systems in the field, Thompson estimated. That often forces troops to carry multiple radios with them, he said.

The Joint Tactical Radio System will replace those older systems.

“This is the digital backbone for all future military communications,” Thompson said. “Eventually, it will enable any warfighter anywhere in the world to talk to any other warfighter in a split second.”

The new contract is for the “airborne, maritime and fixed site” piece of the JTRS program — much of which falls under the umbrella of the Air Force and Navy. It will upgrade radios on C-130 and C-5 transport aircraft, C-17 airlifters, Global Hawk and Predator unmanned aerial vehicles, Apache helicopters and Osprey tiltrotor vertical/short takeoff and landing aircraft.

It will also produce radios for surface ships and subsurface ships, including aircraft carriers, cruisers, destroyers and several amphibious vessels.

“This system is crucial to support information sharing and combat readiness, a must for today’s warfighters,” said John Mengucci, president of Mission & Combat Support Solutions for Lockheed Martin’s Information Systems & Global Services.

The contract loss is the second blow the Pentagon has dealt to Boeing in less than a month. In late February, Northrop Grumman Corp. and European Aeronautic Defence and Space Co. bested Boeing on a $35 billion Air Force deal to replace 179 air-to-air refueling tankers.

In a statement, the company said it is disappointed by the outcome of the JTRS competition. It would not comment on whether it plans to protest the decision, saying only that it looks forward to the Pentagon debriefing to explain the choice.

Boeing already holds the contract for another key piece of the JTRS program, supplying ground mobile radios, which are used primarily by the Army and Marines. Cost overruns, scheduling delays and technical hurdles forced the restructuring of that award several years ago, but a Boeing spokesman stressed that the program is now on track.

Still, Thompson said, those problems may have helped tip the balance in Lockheed’s favor in the latest competition.

Thompson noted that the new radio system is critical to the success of Future Combat Systems, a massive Army modernization effort that will use futuristic communications technology to link manned and unmanned aircraft and vehicles in real time. Boeing is one of the lead contractors on that program.

Shares of Chicago-based Boeing fell 75 cents to $73.47 Friday. Shares of Lockheed, based in Bethesda, Md., rose 14 cents to $100.18 Friday. Both stocks were flat in after-hours trading.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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