A U.S. Air Force CH-47 Chinook helicopter is seen standing on the tarmac at the airport in Jasionka, near Rzeszow, Poland, on Feb. 16, 2022. (Wojtek Radwanski, AFP/Getty Images/TNS)
(Tribune News Service) — When Russia attacked Ukraine last February, investors such as Pennsylvania's state pension funds rushed to dump their Russian investments, horrified at the prospect of profiting from the unprovoked invasion.
And firms with Russian and Ukrainian operations, like the Newtown, Pa.-based EPAM — an information technology outsourcing firm that counted more than 20,000 staff in the two countries and neighboring Belarus — rushed to protect staff and cut its exposure, bracing for falling sales and higher costs.
A year later, as the war grinds on, EPAM is still counting the cost of cutting ties to Russia and moving its Ukrainian staff to safer areas. Meanwhile, big defense contractors, such as Boeing's Ridley Park helicopter factory and Pennsylvania-based ammunition makers that supply the U.S. military and its allies, have gained orders as war equipment sales rise.
And start-ups like Nexteon, a Philadelphia-based software firm whose systems help airliners avoid Russian jamming, say they see opportunity.
'War took a year of our life'
"The Russian invasion shocked the world, and put us on a very different set of priorities," EPAM chief executive Arkadiy Dobkin told investors in a conference call Feb. 16.
At the time of the invasion, more than half the company's $5 billion in yearly software outsourcing work was done in Ukraine, Russia, or Belarus, where Dobkin is from and which Russia dominates.
As Ukrainians battled to hold their capital, Kyiv, shares of EPAM, which had recently joined the S&P 500 list of most-valuable U.S. companies, fell by nearly half, on fears the company would be unable to keep its people working under war conditions.
At first, EPAM's public statements were neutral. Within a week, EPAM had agreed to wind down its profitable Russian business and transfer work from the country. And it pledged $100 million for "humanitarian" aid to its people in the region.
It was a costly move: canceled Russian business cut sales by more than 4% a year, extra expenses for supporting staff in Ukraine cut deeper into earnings, and total revenues are only now returning to prewar levels, Dobkin noted.
The company has spent $45 million so far, he said, moving people and their work to safer locations, taking care of their human needs. It expects additional expenses from winding down Russian clients it will no longer serve.
"The war took a year of our life, a year of our growth," he added. "But we know all too well that it's nothing in comparison to what people in Ukraine must go through today."
Dobkin says EPAM is stronger as a result. Having increased operations in Latin America, India and other distant areas, it is now "one of the most geo-diversified IT services companies," with operations in more than 50 countries, he added. "We didn't lose any significant clients."
While it was reducing operations in Russia, the company has moved work to safer parts of Ukraine, and the quality of work done there remains high, Dobkin said. The company's $51 million Ukraine headquarters, under construction in Kyiv, hasn't been damaged, the company reported last fall.
But "the war in Ukraine is not over, and we believe that it will be our daily reality for some time to come," Dobkin told investors. He called on staff to maintain "even higher level preparedness for new and unexpected challenges," as the global economy slows.
War sales
The U.S. and its European allies have been shipping so much military equipment and ammunition to Ukraine that Pentagon generals have been complaining that supplies are running low and asking Congress to buy more.
European countries are buying more U.S. war equipment to replace what they have sent to Ukraine, or bracing for the threat of future wars.
Among the first contracts announced since hostilities started, Boeing's Ridley Park, Delaware County helicopter plant, was tapped to supply Germany with 60 Chinook CH-47F heavy-lift helicopters, at a cost of more than $5 billion. The deal was in the works before the war began, with Germany feeling pressure from the U.S. to beef up its defenses.
With more than 4,000 workers, the Ridley Park plant is the Philadelphia area's largest remaining industrial employer. While the U.S. withdrawal from Afghanistan has reduced demand for the stronger, sand-resistant Chinook that Boeing had expected to produce there, the German order will help keep the plant busy over the next few years. The plant also makes Osprey vertical take-off aircraft, mostly for the Marines.
Separately, Day & Zimmerman, the Philadelphia engineering conglomerate owned by members of the Yoh family, has been advertising for more workers at the American Ordnance ammunition plant it operates near Des Moines, Iowa, and at other munitions locations in South Carolina, Texas, in its corporate headquarters in Center City, and elsewhere. The company listed 80 open positions in several states at its munitions group, as of last week.
The Army has meanwhile speeded up production at its Scranton Army Ammunition Facility in northeastern Pennsylvania, a former railroad locomotive repair shop which has produced more than a million artillery shells for the Ukrainian armed forces over the past year.
Unjamming
Civil aviation planners have been trying to fit more airliners into global airspace, using the satellite data that powers global positioning systems (GPS) to replace aging radar networks, which don't cover large parts of the planets, and to safely pack more takeoffs and landings into popular airports.
But cybersecurity concerns have delayed more-sophisticated digital systems. And the war in Ukraine has introduced a new element — mass signal-jamming, for example by Russians north and south of Ukraine, and in its Kaliningrad enclave, which borders Poland and the Baltic States, near Germany and Scandinavia.
Increased jamming has given an impetus to specialized communications contractors such as Nexteon Technologies, an Ambler-based software company helping to build an independent signal network.
The Ukraine war "changed the airspace map of Central Europe very fast," said Jill Wittels, the former L3 Communications executive who now serves as chief executive of Nexteon, whose investors include state-funded Ben Franklin Technology Partners and Celerity Capital in West Conshohocken. Staff includes veteran air-traffic engineers and Wall Street fund-raisers.
By early March 2022, just after the Ukraine invasion, Russians were "jamming" the channels used by air traffic with so many signals that commercial pilots flying over Central Europe found they could no longer rely on satellite data. "They end up with a gap in their tracking," said Wittels. "Our system can fill in the gap."
A Ukrainian software development company, ELEKS, is helping build the system. Like many Ukrainian companies, it diverts part of its profits to medical and humanitarian aid, Wittels said.
Nexteon says its system has been tested by three of the largest international airlines and five of the largest in the U.S., in partnership with a group of manufacturers. Wittels said a commercial-cargo carrier she won't identify is already a client, and the firm is in talks with airlines.
The system is expanding from an initial network based in Germany: "Our goal is to cover the globe," Wittels said.
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