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Homeland Security 2.0


Few if any of the 68,000 rabid Philadelphia Eagles fans arriving for last Sunday's National Football League playoff game against the New York Giants knew that they had been scanned by one of the latest high-tech anti-terrorism tools. Pennsylvania security officials deployed radiation probes at the gates of Lincoln Financial Field to stop terrorists from sneaking in a homemade nuclear device that could kill thousands. Personnel on the grounds carried even more-sensitive equipment.

The new gear, made by Thermo Fisher Scientific Inc. (TMO), was tailored to distinguish dangerous radioactive material from the harmless traces left by common medical procedures that have prompted screeners to question more than a few innocent fans at events such as the Super Bowl. The Waltham (Mass.) company's more discerning scanner and similar new products from competitors are part of a wave of advanced equipment coming to market five years after the September 11 terrorist attacks. Call it homeland security 2.0.

After the 2001 attacks, federal, state, and local governments snapped up equipment that had been created for industrial applications such as detecting leaks at nuclear power plants. But the gear had been quickly adapted for its new use and didn't always perform as required. Portable detectors carried by some New York City policemen signaled an alarm near any radioactive source, even the granite around entrances to subway stations. Scanners for ports tagged containers carrying kitty litter as potential hazards. U.S. Customs & Border Protection, a division of the Homeland Security Dept., told Congress in May that it recorded 318,000 alarms from port sensors scanning 80 million containers over the past three years without finding any serious threats.

Thermo Fisher is aiming to eliminate the false alarms. "The government rushed to buy systems that weren't optimized to detect the right thing," says Thermo's 49-year-old CEO, Marijn E. Dekkers. "We're working on better versions for a wave of reconstruction" that includes projects like installing next-generation scanners in major ports.

Dekkers, who closed an $11 billion merger with Fisher Scientific in November, is looking for growth markets as he integrates the two companies' largely complementary product lines. Thermo is best known for lab gear such as mass spectrometers used in biotech research and detection equipment used by manufacturers and government security agencies. Fisher concentrates on test tubes, lab chemicals, and other basic items. Wall Street has given the merger a big vote of confidence: The stock has soared 47% over the past year, to almost 45 as of Jan. 9.

SAFE HARBORS

Dekkers is experienced in the challenges of consolidating businesses. Raised in the Netherlands, the chemical engineer came to the U.S. in 1985 to work at General Electric Co. (GE)'s research unit in Schenectady, N.Y. After moving into management at Honeywell International (HON), he arrived at Thermo in 2000 as chief operating officer and helped merge 24 publicly traded entities, each with its own stable of brand names, into one leaner corporation.

Security products are a big part of Dekkers' expansion plans. Last July the feds tapped Thermo and two competitors, Raytheon (RTN) and Canberra Industries, for a $1.2 billion pilot project to install next-generation scanners, starting with New York and New Jersey's ports. Thermo says the contract will be worth $200 million over five years. A Democrat-controlled Congress may mean yet more orders. Republicans spent billions to protect airports but much less on ports. "Democrats have been yelling about this for years," says Brian W. Ruttenbur, a Morgan Keegan & Co. analyst in Nashville who covers companies active in homeland security.

By Aaron Pressman


Reviving Keynes
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