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Businesses Benefiting From War

Spencer Michels reports on some of the technology companies that have high-tech tools in the field that may mean big bucks on the home front.

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  • SPENCER MICHELS:

    Precision bombing of specific targets with limited damage to nearby areas has been the most publicized example of how American technology has had an impact on the war. But the military is using plenty of other high tech tools like computers at central command that have changed the face and the speed of war. In California, Silicon Valley companies have invented many of the innovations in military and homeland security techniques, and are hoping to develop more.

  • SPOKESMAN:

    What I'd like to do, Darren, is I'd like you to come up from the south and conduct your mission from that direction.

  • SPENCER MICHELS:

    Software engineers at Latitude Communication have devised this conferencing system called "Meeting Place," that allows battlefield commanders, generals at the Pentagon and others, thousands of miles apart to hold a meeting using maps and video and voice. This is a simulated exercise.

  • MAN:

    …We're going to probably have to come in a little more from the east, because this oil field's on fire. If you'd like I could show you some video of that.

  • SPOKESMAN:

    Sure, that will be great. Why don't you bring up that video?

  • MAN:

    Okay.

  • SPENCER MICHELS:

    CEO Rick McConnell says his product was originally developed for business conferences. But 9/11 and the war have changed the market.

  • RICK McCONNELL:

    I think if you look at the general economic environment, those companies are significantly tied into government and security are I think doing much better than organizations that aren't.

  • SPENCER MICHELS:

    Adapting commercial technologies for military and homeland security uses is the opposite of the way the process started in the '60s and '70s according to venture capitalist Stephan Dolezalek .

  • STEPHAN DOLEZALEK:

    We got commercial benefits out of technologies that were originally built for the military. We have now come full circle to a point where we've got commercial technology that wasn't at all built for the military, but we've got those same big companies now deploying the commercial technology in a military application.

  • SPENCER MICHELS:

    Dolezalek, a partner at Vantage Point Venture Capital has backed several companies that make commercial products that have military applications. In his portfolio is Inxight, which developed a sophisticated search engine that can be used to cull intelligence out of multiple sources. Only 20 percent of Insight's revenues come from government contracts. But of late, that's been increasing. John Laing is CEO.

  • JOHN LAING, CEO, Inxight:

    Well, if you think of George Tenet's– the director of the CIA'S testimony– to Congress, he said the information was there about 9/11. We just couldn't extract from all the volumes of information. So, that's what we allow you to do. We help connect the dots.

  • SPENCER MICHELS:

    Dolezalek, who sits on the insight board, says the new uses for high tech products could make a difference in a industry that has been in a big slump.

  • STEPHAN DOLEZALEK:

    It certainly impacts current revenues. So, we're obviously in somewhat of a technology slump from an economic standpoint in the valley. All of those companies are directly benefiting from the fact that they now have a whole new market for the technology that didn't exist several years ago.

  • SPENCER MICHELS:

    It is the smaller Silicon Valley companies, some not even traded publicly, who have come up with many of the innovations that have made this war different than even the 1991 Gulf War. Vic Burma, the CEO of Savi Technology, says logistically that war had big problems.

  • VIC VERMA, CEO, Savi Technology:

    Forty thousand containers got shipped to the Gulf, and they had no idea what was inside twenty-eight thousand of them. They called it "just in case logistics."

  • SPENCER MICHELS:

    Savvy pioneered a new system of securely locking huge shipping container, using an electronically activated bolt and a device for keeping track of what is packed inside the containers. With extremely long American supply lines in the current Iraq War, it has been crucial for the military to be able to quickly find and distribute ammunition, food, and other items to the troops.

  • VIC VERMA:

    A soldier can walk over and with a hand held device like this, basically read the entire contents of the container, or do a search such that he looks at a whole sea of containers and presses the word milk, and only those containers have milk in it will respond, and little arrow will come on and point the soldier right to that particular container, so he doesn't have to manually search and open containers.

  • SPENCER MICHELS:

    Military uses account for 50 percent of the $40 million in annual revenues. Most of the rest comes from sales to commercial ports, which use essentially the same devices; nearly 40,000 have been sold.

  • SPOKESMAN:

    Answer my question, yes or no.

  • SPENCER MICHELS:

    Some technology is barely off the drawing board, but showing promise. About 50 of these hand held gadgets are used in Iraq. They are called phrase-a-laters and they translate phrases of English into Arabic or other languages.

  • SOLDIER:

    I'm going to try to find something we can ask him to see if he has any other wounds.

  • SPENCER MICHELS:

    The phrase-a-later was developed build S RI, a nonprofit research institute near Stanford University.

  • SPOKESMAN:

    So this is the boot and the technology that we're talking about is this insert that goes into the heel of a boot –

  • SPENCER MICHELS:

    SRI developed this device that generates electricity to power a soldier's cell phone or electronic gear. It is one of the products that has military potential, but also has civilian uses. Prsasanna Mulgaonkar directs strategic initiatives at SRI and concentrates on military research. He says the war will improve the economy, especially in the high tech sector.

  • PRASANNA MULGAONKAR, Sri International:

    In the long term, definitely. If you look at where the Internet is today, that came about because of research and development funds that were put in by the defense research agency, DARPA, back about 20 years ago, which has now matured and created a whole industry on it.

  • SPENCER MICHELS:

    While some analysts say the trend is for commercial products to be adapted for military use, Mulgaonkar sees defense as the engine spurring on high tech..

  • PRASANNA MULGAONKAR:

    The government is in some sense the seed capital for all of the technologies that eventually mature, and fine their way out into the public use.

  • SPENCER MICHELS:

    Mulgaonkar, who has been watching the defense technology business for 30 years, says that while it is impossible to know what programs will succeed, war has been and will continue to be an impetus for innovation and profit.

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