Harris Corp.(HRS) is a leading supplier of communications equipment and services, recently won a massive contract worth $289 million from the Government of Alberta, Canada. The total contract size may extend to $370 million in order to prepare the Alberta First Responders Radio Communications System (AFRRCS). The project, once completed, will offer public safety communications within 256,000 square-mile area (661,190 square-kilometer area).
The development of P25 (Project 25), 700-MHz trunked network, will substitute the two existing backdated radio networks. The goal of P25 is to enable public safety responders to communicate with each other and thus achieve enhanced coordination, timely response and efficient and effective use of communications equipment. It will hugely benefit the Royal Canadian Mounted Police and the Government of Alberta.
The project supports both the principles, network infrastructure (P7300 portable) and radio terminals (M7300 mobile radios). The implementation of 700-MHz P25 system will support more than 400 available radio repeater and network sites. Furthermore, the inclusion of VHF P25 will offer better services even in mountain and rural locations.
In the ensuing third quarter of fiscal 2011, Harris has already won more than $1 billion contract. Within a span of one week, the company has won four projects, thereby showing strong signs of growth. It also reported an excellent second quarter 2011 financial results with revenue showing improvement of 18.1% year over year. Total orders generated during the quarter were $1.41 billion.
With the huge cash available, the company is focusing on inorganic growth. Presently, it has shown its interest in buying Carefx Corporation, a leading provider of interoperability workflow solutions. The acquisition will give Harris a strong foothold in the commercial healthcare market. It has also bought Malibu Media Platform, an online media exchange that facilitates buying and selling of TV advertisements.
Harris operates in a highly competitive communication equipment industry and faces intense competition from Boeing Co. (BA), General Dynamics Corp. (GD) and Raytheon Co. (RTN).
We thus maintain our long-term Neutral recommendation for Harris Corporation. Currently, Harris Corporationhas a Zacks#3 Rank, implying a short-term Hold rating on the stock.
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