Harris Communications Firing on All Cylinders

Radio technology specialist Harris Communications (HRS) reported solid earnings and raised its full-year guidance. A review of the conference call indicates that the company is firing on all cylinders after nearly becoming a one-trick (defense) pony.

Harris started its new fiscal year with an excellent Q1. Posting outstanding revenue and earnings growth. Revenue for the Q1 was $947 million, a 25% increase compared to the prior year quarter. Organic revenue growth continued at a very strong 18%. Orders in the Q1 increased 53% to $1.1 billion significantly outpacing revenue and setting the stage for a continued growth throughout fiscal year 2007.

Government communication systems revenue was $459 million, 6% higher compared to the prior quarter as revenue increased across the department of defense, civil programs and technical services business areas.

RF communications. RF began 2007 with a very strong quarter, revenue was $264 million, an increase of 54% over the prior year.

Microwave had revenue and orders growth and strong operating performance once again in the quarter. Revenue increased to $94 million, 24% above the prior year. This is the seventh consecutive quarter that orders are been higher than sales and we continue to built order backlog.

Revenue in the broadcast communication segment was $140 million. And that’s up 59% compared to the same quarter a year ago. Revenue benefited from our prior year acquisitions of Leitch Technology, Optimal Solutions, and Aastra Digital Video. Excluding the acquisitions, revenue was about flat with the prior year.

The government communication systems and RF communications segments sell primarily to the Department of Defense, while the other two segments consist primarily of commercial customers. Back in 2000 the business was evenly split between government and commercial, but the communications bubble and 9/11 attacks shifted the mix to 80% government. Due largely to the acquisitions, the business is regaining some of its prior balance as commercial customers are back to 34% of total sales. The pending acquisition of Stratex Networks will further improve the balance.

HRS 1-yr chart: