SECRET

DELIVER BY OFFICER -- HAND TO HAND ONLY.

NAVY DEPARTMENT
OFFICE OF THE CHIEF OF NAVAL OPERATIONS
WASHINGTON

MEMORANDUM

From: The Director of Naval Communications

To: The Vice Chief of Naval Operations.

Subject: Navy Contract NXs7892.

1. The following informaiton should not be disclosed except to those few persons who need to know in order to safeguard this vital project.
2. The Navy Department has a contract NXs7892 with the National Cash Register Company, Dayton, Ohio. This contract calls for the development and production of special analytical equipment for the purpose of breaking the German four-wheel Enigma Cipher Machine. It is about a three million dollar job involving numerous small electronic parts, although the aggregate material is relatively very small in comparison with other important defense projects.
3. Since February 1942, the German Millitary and Naval Communications have been attempting to distribute a fourth wheel for installation into their three-wheel Enigma machine. This distribution has now been completed so far as U-Boat traffic is concerned and is spreading to other circuits. All existing devices both here and in England for breaking this cipher have been rendered obsolete, except on rare occasions when mistakes in technique are committed by the enemy.
4. The importance of meeting this German change was recognized by the British, and I am informed that Prime Minister Churchill has directed that British material needed in the development and production of equipment designed for their special intelligence purposes be given an absolutely clear right of way over everything else.
5. As a result of British experience with similar equipment for attaching the three-wheel Enigma, we feel that there is but little doubt that the U. S. equipment called for in the subject contract will enable us to read the German submarine traffic currently. This traffic contains specific information as to the location of German submarines, their orders, strategy, courses, depths of oepration, etc. With this information, we will not only be able to locate the German submarines for offensive