Companies Clamber for Homeland Security Cash

Others are also quickly getting in on the act. Microsoft (MSFT - Cramer's Take - Stockpickr) named a former Coast Guard official to head a new homeland security division. And Motorola (MOT - Cramer's Take - Stockpickr) is trying to secure funding to make its radio networks interoperable. That would enable emergency units in different counties and cities to communicate and share data with each other.

Security Spree

Among security firms, L-3 Communications (LLL - Cramer's Take - Stockpickr), which makes intelligence technologies, has been on an acquisition path. Earlier in the year, it purchased businesses from Northrop Grumman. More recently, it bought International Microwave, a manufacturer of surveillance systems, and took a stake in Millivision, a security systems firm.

Also, OSI Systems (OSIS - Cramer's Take - Stockpickr), which manufactures metal detectors and X-ray baggage scanners, bought Ancore, an aviation security firm.

Elsewhere, Applied Signal Technology (APSG - Cramer's Take - Stockpickr), which manufactures eavesdropping equipment, and American Science & Engineering (ASE - Cramer's Take - Stockpickr), an X-ray technology firm, are looking to benefit.

"With the consolidation of different agencies under one roof, the government is going to have to buy new equipment," said Steven Gish, a research analyst at Roth Capital Partners, adding that the opportunity for investors in various sectors is coming, but that people will have to be patient.

Indeed, some analysts say it may be years before homeland security dollars go to the corporate sector. "Companies will not be able to do vendor booking for most of these projects until at least 2004," said Stephen Murphy, a research analyst at CIBC World Markets.

To be sure, shares of Identix fell 19% on Dec. 16 after it said second-quarter revenue would be lower than previously expected as a result of delays in government spending plans. The firm also cited reduced orders from the government, due to uncertainty about the agencies' roles within the new Homeland Security Department. And it lowered its sales estimates for the remainder of fiscal 2003.