Response to April 28th FT article, "investors on the defensive"

Sir,

With regard to the article "investors on the defensive" by Sylvia Pfeifer (April 28th) there are elements underpinning the writers four concerns which have possibly been underplayed. First, BAE Systems is equally exposed to the United States defence market where procurement budgets for FY 2009-2013 indicate higher investment in procurement at the expense of R&D, which should further enhance margin performance of the more effective manufacturers. Secondly, Scaling back operations in Iraq and Afghanistan will still have a legacy in terms of reconstituting and refurbishing worn-out equipment.

Thirdly, concerning BAE exposure to further investigation they are not alone. Thales faces further hearings in South Africa this summer and the Boeing Northrop Grumman battle over the KC-45A air tanker tactics continues to illustrate the thornier challenges for the industry.

Lastly, with regard to support services whilst there are no doubt opportunities which would seem common sense to the finance community given the scale of the US market, the cultural differences in approach, plus the difficulties for primes of taking their cost base from sales and manufacture into razor-thin support services create challenges for all players.