Harris Wins U.S. Army Contract - Analyst Blog

Recently, Harris Corp. (HRS) has won a contract worth $55 million to deliver advanced satellite terminals to the U.S. Army. This contract, a part of U.S. Army’s Modernization of Enterprise Terminals (MET) program, has a five-year base period plus another five-year option period. The potential size of the full contract is $600 million.

 

As a leading government electronics supplier, Harris is benefiting from the increase in the U.S. defense expenditure. Since April 2009, Harris has so far booked $153 million of MET contract. Harris has a broad product line and an enviable win rate on government contracts (over 60% historically).

 

The two defense electronics divisions (Government Communications and RF Communications) are expected to see a noticeable pick-up in the next couple of years as overall defense spending is likely to remain firm and upgrade of the military’s communication infrastructure remains a priority.

 

Harris is known for its excellent operating efficiency. The company has decided to acquire privately held CapRock Communications, a global provider of managed satellite communications solutions for energy, government, and maritime industries. We believe the takeover of CapRock will further improve the company’s operating income.

 

Harris is likely to get synergies in its core Government Communications businesses from CapRock. Both Harris and CapRock have a well established presence in the U.S. Department of Defense and the Department of Homeland Security.