US firm Raytheon wins $149m Iron Dome contract

Deal adds a second source for defense system’s Tamir missiles, suggests anti-rocket batteries to be expanded

An Iron Dome missile-defense system. (photo credit: Flash90)
An Iron Dome missile-defense system. (photo credit: Flash90)

Raytheon, a major American defense contractor and the world’s largest producer of guided missiles, has won an Israeli contract to supply $149.3 million in Tamir missiles, the projectiles used in Israel’s Iron Dome defense system.

The Iron Dome system was jointly developed and funded by the US. It is credited by the IDF with shooting down over 700 rockets from Gaza that were headed for Israeli population centers, a “kill ratio” of about 85-90 percent of the total rockets fired at population centers. (Most of the 4,500 rockets fired from Gaza fell in uninhabited areas in Israel or, in some cases, inside Gaza.)

The contract, from Israel’s Rafael Advanced Defense Systems Ltd., is intended to expand Israel’s supply of Tamir missiles, according to a Raytheon press release last week.

“Iron Dome has proven itself time and again by protecting Israel’s population from incoming rockets, artillery and mortars,” said Raytheon Missile Systems president Taylor Lawrence. “The sourcing of Tamir interceptor components in the US will go a long way to ensuring sufficient volumes of available Tamir missiles for Israel’s defense.”

But it is also seen in the US as part of the adoption of Iron Dome’s Israeli-developed technology abroad.

“With more than 1,000 successful intercepts, Tamir is the only combat proven counter rocket, artillery, and mortar interceptor available for US and coalition partners today,” the press release read.

An Iron Dome air defense system fires to intercept a rocket from the Gaza Strip in Tel Aviv, Israel, on Wednesday, July 9, 2014. (photo credit: AP/Dan Balilty)
An Iron Dome air defense system fires to intercept a rocket from the Gaza Strip in Tel Aviv, Israel, on Wednesday, July 9, 2014. (photo credit: AP/Dan Balilty)

Raytheon and Rafael, a state-owned company, are already jointly developing the Stunner missile that will be used in Israel’s medium-range David’s Sling missile defense system.

DiDi Yaari, CEO of Rafael, praised the US-Israeli cooperation that developed Iron Dome.

“The partnership between the Missile Defense Agency and the Israeli Missile Defense Organization has been extraordinary,” he said. “We’re very appreciative of the US’s support for this life-saving system. Maintaining Iron Dome’s supply gives Israelis great peace of mind.”

According to the investment site The Motley Fool, the deal may mean “big news for owners of Raytheon stock.”

“Details on the contract are few at present. When I asked Raytheon to elaborate on the types of components it intends to supply to Rafael, their value relative to the cost of a fully assembled missile, and the number of missiles Rafael intends to manufacture, the company was understandably reticent to elaborate,” Motley Fool writer Rich Smith wrote Sunday. “Raytheon did confirm that this is the first announcement of an Iron Dome sales contract, with dollar figures attached, since the company announced it was ‘teaming up’ with the Israeli company to market the Iron Dome system in the United States.”

Raytheon and Rafael signed a co-marketing agreement for Iron Dome in 2011.

“Missile systems such as Iron Dome are Raytheon’s bread and butter and the company’s largest source of revenue, accounting for more than $1 of every $4 the company takes in annually, according to data from S&P Capital IQ,” notes Smith.

“In missile defense, much of these profits came from Raytheon’s legacy Patriot air-defense system. Now it appears Raytheon has won a piece of an even more effective weapon, which scores at least 85% effectiveness in shooting down incoming missiles (versus anywhere from 40% to as little as 9% for Patriot). And with Rafael placing a bulk order for $149 million worth of Iron Dome parts — a value two to three times as large as the cost of all Tamir missiles fired during the recent Gazan conflict — it appears the Iron Dome program is ramping up rapidly,” he writes.

“For Raytheon stock owners, that’s nothing but good news.”

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