Yesterday, Harris Corp. (HRS) was awarded a $228 million contract by the U.S. Marine Corps to provide Falcon II AN/VRC-104 high-frequency radio systems to be used in MRAP-All Terrain Vehicles. The AN/VRC-104 radio system will provide reliable, secure, high-frequency tactical satellite communications for this new army vehicle. The U.S. Army will use this vehicle mainly in the battlefield of Afghanistan because of its mountainous terrain. Furthermore, the U.S. Department of Defense raised the ceiling on a Navy contract with Harris Corp.’s RF Communications Division by $311.4 million to $897.9 million for the period up to February 2010. The contract is for tactical radios as well as support systems.
Harris has a strong market position in the government communications sector, with a broad product line and an enviable win rate on government contracts (more than 60% historically). For fiscal 2010, Harris estimated revenues from the tactical radio business to be in the range of $1.4 billion to $1.5 billion. Several industry researches have predicted that tactical radio segment may provide a multi-billion dollar business opportunity to Harris in the next couple of years as overall defense spending is likely to remain firm since upgrading the military’s communications infrastructure remains a priority.
According to our assessment, Harris will benefit in the near term from higher defense expenditure by the U.S. government coupled with new expansion drives in the Asian, European and African markets. The company has established a solid international dealer network to pursue multiyear contracts throughout these regions. Harris has estimated that international markets represent a pipeline opportunity of around $4 billion. The company has won large-scale multiyear standardization contracts in Mexico, Australia, Algeria, the U.K., Pakistan, Sweden and Iraq.
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