Mr. Gaspar: The niche of the business that we are in is defense electronics. We have activities in almost every area of defense electronics, starting from airborne electronics, ground-based vehicle electronics, infantry soldier electronics, unmanned systems, naval-based systems and more. We assess the worldwide market in our area of expertise in the range of $100 billion per year. Our market share is about $3 billion, and we have a fair potential for growth.
TWST: What do you see as the key issues or trends that will have an impact on the defense electronics industry and then obviously the company?
Mr. Gaspar: First of all, a major issue of course is the defense budgets worldwide, which we all know are driven among other factors by local conflicts, international tension, anti-terror activities and the bigger conflicts, such as Iraq and Afghanistan. These are the major drivers of the budgets worldwide. We have seen over recent years a steady growth in the defense budgets, with some flattening this year and probably maintaining that situation for the near term. I exclude some of the supplemental budgets allocated to the operations in Afghanistan and Iraq. In the U.S., we see some growth in the base budget; Europe is more or less flat. In the rest of the world, we do see growth in the Far East and South America. We are an Israeli-based company, and the sales to the Israeli Ministry of Defense are about 20% of our revenues. The defense electronics budget picture is slightly more optimistic. We see in most areas of defense electronics year-over-year growth higher than the basic defense budget growth. Governments, in many cases, upgrade existing platforms rather than buy new expensive ones. Many of such upgrade activities include electronic systems. As a result, we see ourselves in a niche of the defense market that is constantly growing. Specific areas of growth are command and control, communications, night vision systems, unmanned platforms, and training and simulations; these are the major areas that are growing faster than other fields. Regarding our company, we feel that we were fortunate that in previous years we decided to invest in these fields so that today we are actually able to enjoy the fruits of good decisions made in the past. Presently we are well positioned in most of the growth areas in the defense electronics.
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