IBM -- Helicopters -- Big Blue Produces More Than Computers, Software

WASHINGTON - Say IBM, and most people think of computers. Mainframe computers. Desktop personal computers. Software.

But as the defense industry was reminded this week, there is also IBM, the helicopter company.

Britain's Royal Navy awarded a $2.5 billion contract this week to International Business Machines Corp. to provide 44 helicopters jammed with electronic equipment designed for anti-submarine warfare. Big Blue beat out not only a home-grown team of British Aerospace PLC and General Electric Co. of Britain, but also a number of struggling U.S. aerospace companies that never even made it into the final competition.

The contract for the Merlin helicopter program reflects the changing nature of military contracting.

For one thing, the business is becoming highly international. And because new weapons systems have become more and more complex, with much of the cost and risk of the systems associated with the computers inside rather than the metal outside, the job of prime contractor is increasingly going to electronics companies such as IBM.

"We've long since determined the ideal aerodynamic structure of a helicopter," said Loren Thompson, deputy director of the national-security studies program at Georgetown University. "What's new are the flight controls, the radar, the laser countermeasures, the infrared countermeasures," all of which depend on sophisticated electronics.

Joel Johnson, vice president of the Aerospace Industries Association, observed that a generation ago, it was the airplane company that automatically was assigned the task of integrating the electronics and the propulsion system into its own airframe. But as the value - and profit - have shifted increasingly to electronics, the traditional "metal benders" have lost the presumption of prime-contractor status.

The "metal-benders," however, also have broadened their bases. The Boeing Co., for instance, has successful computer-services and electronics divisions to guide its teams through the increasingly important avionics and computer-guided systems now used on aircraft. Boeing has been involved in software and systems on several large military ventures, including the B-2 and the Advanced Tactical Fighter. McDonnell Douglas also has expanded its capabilities in these fields.

IBM's supervisory role in the Merlin project is dramatized by the fact that it won't even make the onboard computers or fashion any of the software that will allow the computers to communicate. Two European companies, Britain's Westland Helicopters Ltd. and Italy's Agusta SpA, will manufacture the structure of the flying machines, a variant on a military helicopter they have been making for years. A network of other British and European contractors will supply the radar, sonar, computers, communications equipment and software.

IBM's role will be the "systems integrator" - taking the airframe, engine, flight controls and all the electronic gear, and making sure they work together. If something goes wrong, IBM, with its giant financial resources, will be responsible for fixing it. The reward is that it will get about 10 cents for every 90 cents it subcontracts out to others.

John Sponyoe, general manager of the IBM division that will handle the Merlin contract, said it was an unusual arrangement but not unheard of.

In the early 1970s, the U.S. Navy chose IBM as prime contractor for its anti-submarine warfare chopper known as LAMPS, and analysts said it was largely on the strength of that experience that IBM was able to snare the British contract this week.

In the case of the LAMPS, IBM added some of its own computers and software, along with other equipment, to a helicopter delivered to its Oswego, N.Y., facility by Sikorsky Aircraft Co., a division of United Technologies Corp. Although IBM ran into delays and cost overruns with some of its early LAMPS models, the $2 billion program has since become a successful and profitable one for IBM, the Pentagon's 18th-largest contractor.

IBM's strategy of moving from providing the "brains" of a weapons system to responsibility for the whole program is the mirror image of what some traditional airframe makers are trying to do. Those companies are attempting to strengthen their expertise in electronics in order to safeguard their share of the military budget.

-- Times business reporter Polly Lane contributed to this report.