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Stacey Vanek-Smith: Lockheed Martin reported a healthy profit itself this morning. Though the defense contractor said it expects earnings to fall next year. Marketplace's John Dimsdale explains.

John Dimsdale: The Pentagon has been spending less on conventional weapons and more on what's called "irregular warfare." That's where soldiers become like cops on the beat to defeat insurgencies and keep the peace. The Defense Department has less use for outside contractors.

PAUL NISBET: You end up with lot more soldiers and a lot less arms.

Military analyst Paul Nisbet at JSA Research says makers of big weapons systems face leaner times.

Nisbet: We'll see a downturn eventually to the point where the industry is going to have to shrink a bit.

On the chopping block are Lockheed fighter planes, as well as tanks and ships made by other large defense contractors.

But lawyer Sam Gdanski says they're adapting.

SAM GDANSKI: In order to offset the loss of income on big ticket items, they've been acquiring smaller companies that are more focused on information technology, on items that the troops in the streets really need.

This month, Congress considers a Pentagon budget with more money for soldiers and less for large weapons.

In Washington I'm John Dimsdale for Marketplace.