Defense Contractors Wait to Hear About Budget Cuts

Spending put on hold pending fiscal cliff outcomes

Kratos Defense & Security Solutions Inc. in July bought a company that makes drones used for military target practice. Then the contractor put further acquisitions on hold.

With Washington's budget impasse threatening $500 billion in automatic defense cuts over a decade, Kratos's chief executive officer said the firm didn't know where to place its bets. In the past year, the maker of security and surveillance systems has also halted equipment upgrades and trimmed research spending.

"Guys like us are going to hold a good portion of their cards until there's some budget clarity," Eric DeMarco, the company's CEO, said in a telephone interview.

Military suppliers already have been preparing for a leaner decade by stockpiling cash, cutting jobs and slowing spending.