ABOARD THE USS GEORGE WASHINGTON – Nothing projects U.S. global air and sea power more vividly than supercarriers. Bristling with fighter jets that can reach deep into even landlocked trouble zones, America’s virtually invincible carrier fleet has long enforced its dominance of the high seas.

China may soon put an end to that.

U.S. naval planners are scrambling to deal with what analysts say is a game-changing weapon being developed by China — an unprecedented carrier-killing missile called the Dong Feng 21D that could be launched from land with enough accuracy to penetrate the defenses of even the most advanced moving aircraft carrier at a distance of more than 1,500 kilometers (900 miles).

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EDITOR’S NOTE — The USS George Washington supercarrier recently deployed off North Korea in a high-profile show of U.S. sea power. AP Tokyo News Editor Eric Talmadge was aboard the carrier, and filed this report.

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Analysts say final testing of the missile could come as soon as the end of this year, though questions remain about how fast China will be able to perfect its accuracy to the level needed to threaten a moving carrier at sea.

The weapon, a version of which was displayed last year in a Chinese military parade, could revolutionize China’s role in the Pacific balance of power, seriously weakening Washington’s ability to intervene in any potential conflict over Taiwan or North Korea. It could also deny U.S. ships safe access to international waters near China’s 11,200-mile (18,000-kilometer) -long coastline.

While a nuclear bomb could theoretically sink a carrier, assuming its user was willing to raise the stakes to atomic levels, the conventionally-armed Dong Feng 21D’s uniqueness is in its ability to hit a powerfully defended moving target with pin-point precision.

The Chinese Defense Ministry did not immediately respond to the AP’s request for a comment.

Funded by annual double-digit increases in the defense budget for almost every year of the past two decades, the Chinese navy has become Asia’s largest and has expanded beyond its traditional mission of retaking Taiwan to push its sphere of influence deeper into the Pacific and protect vital maritime trade routes.

“The Navy has long had to fear carrier-killing capabilities,” said Patrick Cronin, senior director of the Asia-Pacific Security Program at the nonpartisan, Washington-based Center for a New American Security. “The emerging Chinese antiship missile capability, and in particular the DF 21D, represents the first post-Cold War capability that is both potentially capable of stopping our naval power projection and deliberately designed for that purpose.”

Setting the stage for a possible conflict, Beijing has grown increasingly vocal in its demands for the U.S. to stay away from the wide swaths of ocean — covering much of the Yellow, East and South China seas — where it claims exclusivity.

It strongly opposed plans to hold U.S.-South Korean war games in the Yellow Sea off the northeastern Chinese coast, saying the participation of the USS George Washington supercarrier, with its 1,092-foot (333-meter) flight deck and 6,250 personnel, would be a provocation because it put Beijing within striking range of U.S. F-18 warplanes.

The carrier instead took part in maneuvers held farther away in the Sea of Japan.

U.S. officials deny Chinese pressure kept it away, and say they will not be told by Beijing where they can operate.

“We reserve the right to exercise in international waters anywhere in the world,” Rear Adm. Daniel Cloyd, who headed the U.S. side of the exercises, said aboard the carrier during the maneuvers, which ended last week.

But the new missile, if able to evade the defenses of a carrier and of the vessels sailing with it, could undermine that policy.

“China can reach out and hit the U.S. well before the U.S. can get close enough to the mainland to hit back,” said Toshi Yoshihara, an associate professor at the U.S. Naval War College. He said U.S. ships have only twice been that vulnerable — against Japan in World War II and against Soviet bombers in the Cold War.

Carrier-killing missiles “could have an enduring psychological effect on U.S. policymakers,” he e-mailed to The AP. “It underscores more broadly that the U.S. Navy no longer rules the waves as it has since the end of World War II. The stark reality is that sea control cannot be taken for granted anymore.”

Yoshihara said the weapon is causing considerable consternation in Washington, though — with attention focused on land wars in Afghanistan and Iraq — its implications haven’t been widely discussed in public.

Analysts note that while much has been made of China’s efforts to ready a carrier fleet of its own, it would likely take decades to catch U.S. carrier crews’ level of expertise, training and experience.

But Beijing does not need to match the U.S. carrier for carrier. The Dong Feng 21D, smarter, and vastly cheaper, could successfully attack a U.S. carrier, or at least deter it from getting too close.

U.S. Defense Secretary Robert Gates warned of the threat in a speech last September at the Air Force Association Convention.

“When considering the military-modernization programs of countries like China, we should be concerned less with their potential ability to challenge the U.S. symmetrically — fighter to fighter or ship to ship — and more with their ability to disrupt our freedom of movement and narrow our strategic options,” he said.

Gates said China’s investments in cyber and anti-satellite warfare, anti-air and anti-ship weaponry, along with ballistic missiles, “could threaten America’s primary way to project power” through its forward air bases and carrier strike groups.

The Pentagon has been worried for years about China getting an anti-ship ballistic missile. The Pentagon considers such a missile an “anti-access,” weapon, meaning that it could deny others access to certain areas.

The Air Force’s top surveillance and intelligence officer, Lt. Gen. David Deptula, told reporters this week that China’s effort to increase anti-access capability is part of a worrisome trend.

He did not single out the DF 21D, but said: “While we might not fight the Chinese, we may end up in situations where we’ll certainly be opposing the equipment that they build and sell around the world.”

Questions remain over when — and if — China will perfect the technology; hitting a moving carrier is no mean feat, requiring state-of-the-art guidance systems, and some experts believe it will take China a decade or so to field a reliable threat. Others, however, say final tests of the missile could come in the next year or two.

Former Navy commander James Kraska, a professor of international law and sea power at the U.S. Naval War College, recently wrote a controversial article in the magazine Orbis outlining a hypothetical scenario set just five years from now in which a Deng Feng 21D missile with a penetrator warhead sinks the USS George Washington.

That would usher in a “new epoch of international order in which Beijing emerges to displace the United States.”

While China’s Defense Ministry never comments on new weapons before they become operational, the DF 21D — which would travel at 10 times the speed of sound and carry conventional payloads — has been much discussed by military buffs online.

A pseudonymous article posted on Xinhuanet, website of China’s official news agency, imagines the U.S. dispatching the George Washington to aid Taiwan against a Chinese attack.

The Chinese would respond with three salvos of DF 21D, the first of which would pierce the hull, start fires and shut down flight operations, the article says. The second would knock out its engines and be accompanied by air attacks. The third wave, the article says, would “send the George Washington to the bottom of the ocean.”

Comments on the article were mostly positive.

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AP writer Christopher Bodeen in Beijing and National Security Writer Anne Gearan in Washington, D.C., contributed to this report.

Wall Street Journal

By ANDY PASZTOR And DANIEL MICHAELS

Thales SA of France scored a major victory Tuesday over Lockheed Martin Corp., as a Thales-led partnership won a roughly $2.1 billion contract to build a fleet of communications satellites for Iridium Communications Inc.

Iridium also plans to spend a total of $800 million to launch the constellation of 72 satellites and for some ground upgrades, but details haven’t been announced.

The satellite award gives a significant boost to efforts by Thales to expand both its U.S. commercial and defense businesses. It also is a big blow to Lockheed, which played a major role in manufacturing Iridium’s current low-earth-orbit communications network. Lockheed was widely viewed as the Pentagon’s preferred provider of the next-generation satellite system, industry officials said. The Pentagon is a major customer of the voice-and-data services supplied by Iridium.

At a time when global commercial-satellite orders are climbing only gradually and Pentagon investments in new, big-ticket space projects have nearly dried up, Lockheed’s management had been counting on the Iridium job to avoid production cutbacks. Lockheed recently reorganized its satellite business in a bid to wrest more synergy from its commercial and military satellite lines.

The satellite-production contract, which was awarded to Thales Alenia Space, a Franco-Italian joint venture controlled 67% by Thales, includes nine spare satellites. At least 40% of the work is slated to be done in North America. Boeing Co. is part of the winning team, and other U.S. subcontractors are expected to be added.

The Thales venture was established in 2005 by the Alenia space unit of Italy’s Finmeccanica SpA and French telecommunications giant Alcatel-Lucent SA, but ownership changes since then have madeDassault Aviation SA the second-biggest shareholder in Thales, with a 26% stake, after the French state, which holds 27%.

The new satellite fleet, dubbed Iridium Next, is slated to be launched between 2015 and 2017, as Iridium’s current satellites reach the end of their useful life. Industry officials consider it the single largest commercial-satellite project signed in the past decade or likely to be awarded for at least the next several years.

Matt Desch, chief executive of Iridium, said in an interview that the Thales-led team offered a “strong technical proposal married with a strong financing package.” The French export-credit agency has agreed to provide up to $1.8 billion in loan guarantees. Lockheed sought to remain competitive by offering its own financing package backed by the U.S. Export-Import Bank.

Iridium has been growing rapidly, and now has about 360,000 subscribers world-wide, but the McLean, Va., company has been bedeviled by doubts about its survival from some quarters on Wall Street.

According to Mr. Desch, the satellite-replacement contract should answer those doubts and any other questions about Iridium’s prospects.

The job is an important boost for Thales, which is emerging from months of management upheaval. Roughly 10% of the company’s overall annual revenues are tied to the U.S., with the Pentagon and other U.S. government customers accounting for about $1.3 billion in sales. Dassault and the French state have put pressure on Thales to boost its financial performance, and winning U.S. orders is part of that effort.

In December the company announced a reorganization to boost its margins. It blamed continued pressure from soft airline markets, constrained defense spending and a weak dollar for its disappointing returns. Thales said it planned to tighten control over program management by reorganizing around three regions and seven divisions, holding each region accountable for profit-and-loss accounts.

Reynald Seznec, CEO of the Thales venture, said “we are a global player, and space is a global market.” Thales hopes, among other things, that a weaker euro and extensive production arrangements in the U.S. will help improve the venture’s price competitiveness with U.S. customers.

The contract announcement comes amid increasing competition and expected consolidation among mobile satellite-services providers. Iridium’s revenue has been growing at an annual clip of about 15%, though rivals such as London-based Inmarsat Plc also are gearing up to renew their fleets and step up challenges to the U.S. company in certain markets

Last year Dassault Aviation pushed to exert control over its holding in Thales by installing a CEO of its choosing. Longtime Thales chief Denis Ranque, who had won plaudits for his decade-long restructuring and expansion of the company, resisted replacement. A boardroom fight and its spillover consumed Thales for much the year after Luc Vigneron was placed at the helm.

Iridium’s selection of Thales Alenia Space is something of a vindication for Mr. Ranque’s strategy of pushing to expand U.S. sales. Thales initially faced suspicion in the U.S. due to long-running Franco-American friction on security issues. But industry officials said relations with the Pentagon have improved. The French company is seeking to increase its cooperation with U.S. prime contractors, and its U.S. aerospace unit is looking to establish more of a recognizable corporate identity.

In 2001 Thales and U.S. defense contractor Raytheon Co. formed the first major trans-Atlantic security joint venture, although the operation focused on sales outside the two companies’ home markets. Over the years, Thales has won many contracts from the Pentagon for specialized communications and military equipment, but was rarely the leader in Pentagon projects.

Lockheed Martin officials previously felt they were ahead in the competiton, but on Tuesday a company spokesman said they were “greatly disappointed with the contract decision.” The Lockheed spokesman added: “We will continue to provide our valued customers the best total systems solutions in the industry.”

Tim Farrar, a Northern California-based industry consultant familiar with the market segment, said Iridium and head-to-head rival Globalstar Inc. together “are investing so much money on new satellites that it’s hard to see how both companies can meet” the expectations of investors for returns. “Possibly, neither will succeed.” But at the same time, according to Mr. Farrar, “it’s great news for users” of such systems, particularly since Iridium is the only viable competitor to Inmarsat for certain services. Globalstar, based in Milpitas, Calif., four years ago signed a contract with what was then Alcatel Alenia Space to replace its fleet of low earth-orbit satellites, with the first batch slated to be launched later this year.

Reflecting the intense cost pressures on satellite suppliers, industry officials said the satellite-making arm of New York-based Loral Space & Communications Inc. dropped out of the Iridium competiton months ago, apparently after concluding that it couldn’t make any money if it won the contract.

Write to Andy Pasztor at andy.pasztor@wsj.com and Daniel Michaels at daniel.michaels@wsj.com

ELS

By JOE McDONALD, AP Business Writer

BEIJING – A Chinese supercomputer has been ranked the world’s second-fastest machine in a list issued by U.S. and European researchers, highlighting China’s ambitions to become a global technology center.

The Nebulae system at the National Supercomputing Centre in Shenzhen in southern China came in behind the U.S. Department of Energy’s Jaguar in Oak Ridge, Tennessee, according to the list released Monday.

Supercomputers are used for complex work such as modeling weather systems, simulating nuclear explosions and designing jetliners.

The semiannual TOP500 list highlighted Beijing’s efforts to join the United States, Europe and Japan in the global technology elite and its sharp increases in research spending, driven by booming economic growth.

It also reflected China’s continued reliance on Western know-how: Nebulae was built by China’s DawningInformation Industry Ltd. but uses processors from Intel Corp. and Nvidia Corp., both American companies.

The Nebulae is capable of sustained computing of 1.271 petaflops — or 1,271 trillion calculations — per second, according to TOP500. It said the Jaguar was capable of sustained computing of 1.75 petaflops.

The Chinese computer ranked first in theoretical computing speed at 2.98 petaflops, the group said. The list was compiled by Hans Meuer of the University of Mannheim, Germany; Erich Strohmaier and Horst Simon of NERSC/Lawrence Berkeley National Laboratory and Jack Dongarra of the University of Tennessee, Knoxville.

The communist Beijing government wants China to evolve from a low-cost factory into an prosperous “innovation society.” A 15-year government plan issued in 2006 promises support for areas ranging from computers to lasers to genetics.

Boosted by Nebulae’s performance, China rose to No. 2 overall on the TOP500 list with 24 of the 500 systems on the list and 9.2 percent of global supercomputing capacity, up from 21 systems six months ago.

The United States held onto its overall lead with 282 of the 500 systems and 55.4 percent of installed performance.

Europe had 144 systems on the list, including 38 in Britain, 29 in France and 24 in Germany.

Elsewhere in Asia, Japan had 18 supercomputers on the list, up from 16 six months ago, and India had five.

A second Chinese computer also made the Top 10. The Tianhe-1 at the National Super Computer Center in the eastern city of Tianjin, at No. 7, uses processors made by Intel and Advanced Micro Devices Inc., another American company.

The list also reflected breakneck advances in supercomputing speeds.

No. 1 on the June 2008 list was the Roadrunner system at the Los Alamos National Laboratory in New Mexico, capable of 1.04 petaflops, or about two-thirds of Jaguar’s level. In the latest list, Roadrunner dropped to No. 3.

Black duck eggs on the menu of a Chinese restaurant drew the suspicions of a security consultant reporting to renowned security expert Ira Winkler.

The colleague, a former Russian security agent named Stan, was at a new Chinese restaurant in “the middle of nowhere” in the United States, but conspicuously near the R&D center of a Fortune 5 U.S. business.

“Don’t you know black duck eggs are a delicacy in China?” Winkler said Stan asked. “I can’t get black duck eggs in San Francisco, let alone this little piece of crap town in the middle of nowhere.” Stan’s conclusion was that the Chinese restaurant was a front for a Chinese espionage operation targeting the Fortune 5 business.

“That’s an example of how they work,” said Winkler, president of Internet Security Advisors Group, in a Web cast today hosted by the RSA. It was a followup to a presentation he made at the annual RSA Conference 2010 [1] held in March in San Francisco.

Winkler, who considers the attention and outrage paid to the reported attack on Google [2] from inside China last year to be “laughable,” says Chinese espionage and cyber espionage is far more pervasive than anyone realizes, and that physical and computer security systems are extremely ill-equipped to deal with it. Although computer defenses can and should be improved, Winkler thinks those operating computer networks need to be much more aware of the scope of the threats.

Listening to the Web cast was an eye opener, making me realize that as robust as the network security market may be, the bad guys may be more robust.

Besides continually innovating at hacking computer networks in the U.S. and globally, Chinese interests also hack companies physically by infiltrating them with people who can then be recruited as spies, Winkler said.

A U.S. oil company seeking drilling rights off the coast of China was told that it could help secure those rights with a “gesture of good will” of hiring 30 recent Chinese graduates of various U.S universities. The company did that but later became suspicious that one of the employees was speaking a lot in Chinese on the phone. An investigation revealed the employee was calling an official in a Chinese consulate known to be a Chinese intelligence agent.

“Hacking Google? They’re already inside Google. Why do they have to hack them?” Winkler asked.

Far more alarming are the attacks by Chinese hackers, be they with the government or condoned by the government, on U.S. interests including power grids, military and other government systems. In recent years, he said, hackers have broken into the networks of the Department of Defense, the Department of Energy, the White House, the Naval War College and NIPRNET, a defense logistics agency that keeps track of the location of critical military assets.

U.S. corporations are vulnerable, too, he said, because China sees nothing wrong with committing economic espionage in the service of Chinese companies, many of which are state-owned anyway. Of course, the U.S. and other countries spy on each other all the time, but the U.S. would never spy on Toyota and share that intelligence with General Motors, for example. China, on the other hand, has no such qualms.

After explaining the elaborate schemes hackers use to infiltrate computer systems, Winkler lamented the lax security that networks use to protect themselves. “We don’t have proactive-based defenses from zero day attacks,” he said, referring to software vulnerabilities discovered by hackers but not yet by IT security people. Sure, signature-based intrusion detection is a typical way to protect networks, “but I don’t see behavioral-based intrusion detection. There’s very little of that,” Winkler said. Two-step authentication is “exponentially” better protection but not foolproof.

In previous posts, I’ve reported on how Microsoft argues that if organizations adopted the most up-to-date operating systems or Web browsers [3], and were diligent about patch management, they’d be better protected against threats. But Winkler said, despite the wide use of Microsoft globally, this threat goes way beyond anything Microsoft alone can do. “Many companies, when you actually do an audit on them, they’re not running the latest version of whatever operating system they have.”

Winkler’s conclusion: “We’re generally screwed. They are constantly innovating. But what we can do is be more aware of what’s going on.”

Think about that the next time you see black duck eggs on the menu of a Chinese restaurant in the middle of nowhere.

By JOAN E. SOLSMAN

Boeing Co. swung to a third-quarter loss on $3.5 billion of previously disclosed charges caused by the delay-plagued programs for the 747-8 Freighter and the 787 Dreamliner.

The commercial-aircraft manufacturer and defense contractor lowered its forecast for 2009 earnings to between $1.35 and 1.55 a share, down more than $4 from its July forecast. The Chicago-based company stuck with its outlook of $68 billion to $69 billion in revenue for the year.

Monday, rival Lockheed Martin Corp. posted a slight increase in profit but gave a grim view of next year because of belt-tightening at the U.S. Defense Department.

Boeing, which is the nation’s No. 2 government defense contractor, behind Lockheed, has leaned on strength in that business to offset weakness from commercial aircraft as airlines have put purchases on hold as they reduce capacity. Boeing also has tarnished its reputation with delays to both its Dreamliner and 747-8 programs, which resulted in the charges in the most recent period. Boeing last week reiterated that the Dreamliner is set to take its first flight by year-end.

Boeing didn’t say Wednesday that the Dreamliner has moved into a so-called forward-loss position, essentially meaning it is unprofitable, unlike the 747 program.

Chief Executive Jim McNerney said the company looks forward to getting the 747-8 in the air soon.

“The 787 cost reclassification and the 747 charge for increased costs and difficult market conditions clearly overshadowed what continues to be otherwise solid performance across our commercial production programs and defense business,” Mr. McNerney said in a prepared statement.

Boeing posted a loss of $1.56 billion, or $2.23 a share, compared with a year-earlier profit of $695 million, or 96 cents a share. The combined $3.5 billion in charges on the 747 and Dreamliner, the most Boeing has recorded in a single quarter, amounted to $3.59 a share.

Revenue increased 9.1% to $16.69 billion. A machinists strike damped revenue in the year-earlier period.

The commercial-aircraft segment swung to a loss. Sales rose 13% as higher deliveries offset lower services volume. Boeing received 96 gross orders for commercial planes, though 17 others were rescinded. Backlog fell 8% to $254 billion.

Defense-business revenue rose 3% as earnings increased 4%.

Write to Joan E. Solsman at joan.solsman@dowjones.com