"Looking ahead, we're closely monitoring the industry for acquisition candidates that may become available and, as always, we're mindful for price," L-3 chairman and CEO Michael Strianese said during his company's earnings call. Multiple defense sources said they believe that if one company announces a substantial deal, it could prompt others to quickly get serious about M&A. When the ice does thaw, look for security -- both physical and cyber -- to be an area of particular focus. Analysts expect spending on software that can lock down networks, spy on rivals and assess threats and high-tech sensors that can peer around corners or provide clearer views from the air to grow faster than spending on big-ticket items such as new jets and warships. "Technology is the new arms race, and some of the best research is being done in small to midsized firms," one defense banker said. "Prime contractors traditionally have been more than willing to invest to bring new intelligence in-house." Rogers of Harris Williams said he expects to see a lot of portfolio reshaping. He sees a trend toward large contractors, many of whom are under new leadership in the past 12 to 18 months, moving away from previous efforts to be a one-stop shop in favor of more specialization, and he expects to see some large-scale divestitures as a result.