Harris Corp. (HRS), being a member of the General Dynamics Corporation (GD) team, has won a $140 million Space Network Ground Segment Sustainment (SGSS) deal to remodel the ground section of the satellite communications network used by NASA.
This five year deal aims to upgrade the computing and signal processing equipment, enhance reliability and maintenance, improve efficiency, and reduce operations and sustenance costs.
As per the terms of the deal, Harris (HRS) will manage the replacement of all equipment and software in the space-to-ground link of the satellite communications network and will provide support for overall system engineering.
As a leading government electronics supplier, Harris (HRS) is benefiting significantly from the increase in U.S. defense expenditure as well as robust market conditions for microwave communications solutions. Harris has a sustainable and diversified product pipeline with a potential market size of $15 billion. During the third quarter of fiscal 2010, the company generated $1.45 billion of new orders, up almost 40.8% year over year.
Harris enjoys a pivotal market position in the government communications sector, with a broad product line and an enviable win rate on government deals (over 60% historically). The two defense electronics divisions (Government Communications and RF Communications) are anticipated to see a noticeable pickup in the next couple of years as overall defense spending is likely to remain firm as upgrading the defense communications infrastructure remains a priority.
Harris (HRS) operates in a highly competitive communication equipment industry and faces intense competition from Boeing Co. (BA), General Dynamics Corporation and Raytheon Co. (RTN).
We believe Harris (HRS) will gain from soaring defense expenditure by the U.S. government, coupled with new expansion drives in the Asian, European & African markets. We currently maintain our Neutral recommendation on HRS.
