The U.S. Army has canceled a joint Raytheon Co-Lockheed Martin Corp precision attack missile program 90 percent of the way through a six-year, $1 billion-plus development phase, Raytheon said Friday.

We are disappointed by the decision to cancel the NLOS-LS Precision Attack Missile program, said John Patterson, a Raytheon spokesman said, referring to the Non Line-of-Sight-Launch System, as it is known.

Pentagon officials had detailed shortcomings of the system to lawmakers earlier this month.

The demonstrated reliability is 61 percent, below the 85 percent requirement, David Duma, the Defense Department's principal deputy director for operational test and evaluation, told the Senate Armed Services AirLand subcommittee on April 15. He cited the first operational flight tests of the system, carried out in January and February.

The Army is working on a statement about the program and has no immediate comment, said Dave Foster, an Army spokesman.

Netfires LLC, a joint venture of Raytheon and Lockheed, was awarded a $1.1 billion Army contract to develop and demonstrate the family of weapons in March 2004. It was to have been the first part of the Army's Future Combat Systems modernization.

Defense Secretary Robert Gates canceled that program's eight ground vehicles last year for fear they were ill-suited to roadside bombs that have taken a heavy toll on allied forces in Iraq and Afghanistan.

The NLOS-LS system comprises the container launch unit and a precision attack missile. Lockheed Martin is responsible for the container launch unit.

The potential value of the system was not immediately available, according to representatives of Lockheed, Raytheon and the Army. Lockheed had no immediate comment on the cancellation.

In afternoon New York Stock Exchange trading, Raytheon shares were off 8 cents to $59.46 and Lockheed shares were off 35 cents to $86.32.

Patterson said the program was 90 percent through its system design and development phase.

We stand ready to continue development of this important capability should the customer decide to resume the program, the Raytheon spokesman said.

(Reporting by Jim Wolf, editing by Lisa Von Ahn and Gerald E. McCormick)

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