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Wall Street Journal
May 9, 2008
Pg. B3
Electronics, Defense Firm Explores Its Options; Fewer Chances to Grow?
By Matthew Karnitschnig and Dennis K. Berman
Electronics and defense company Harris Corp. has begun exploring its strategic options, and could eventually choose to sell itself, according to people familiar with the matter.
The process could mark the end of independence for Harris, a 113-year-old company with a deep array of products and interests. With a market capitalization of $7.3 billion, Harris supplies technical infrastructure used in everything from HDTV broadcast systems and air-traffic control systems to jet-fighter radio units and cryptography equipment.
Harris, based in Melbourne, Fla., is in the early stages of the process, these people warn, and the company could decide against a sale. The company is expected to receive interest from a number of defense and general industrial companies. These could include the likes of Raytheon Co., BAE Systems PLC and Northrop Grumman Corp.
Harris has benefited greatly from defense spending in Iraq and Afghanistan, with its stock gaining 285% -- a nearly quadrupling in price -- over the past five years, compared with a 50% return for the Standard & Poor's 500 Index.
Still, a process may be a signal that Harris regards its growth opportunities as less attractive than before. After a steady rise since Sept. 11, 2001, there is an expectation that new defense spending will taper off.
Harris's appeal to potential buyers could be its mix of communications-related businesses. Spending on surveillance, remote sensors and communications equipment should stay robust even if front-line defense spending slows.
A challenge for a defense buyer would be whether to keep Harris' civil-sector businesses, particularly its television-broadcast technology.
In the 12 months ending March 28, Harris reported $5.1 billion in revenue and net income of $410 million, more than double the revenue and profit of 2004. The company trades at a price to 2009-earnings ratio of 13.27, slightly below a 14.2 multiple for communications-equipment companies and a 14.8 multiple for defense-industry firms.
The company employs about 16,000 and sells into about 150 countries.
After a big stock downturn in January, Harris shares have gradually increased, closing Thursday at $54.41 each. That is about midway in their 52-week range, which topped out at $66.94.
A Harris spokesman declined to comment.
--August Cole contributed to this article.
May 9, 2008
Pg. B3
Electronics, Defense Firm Explores Its Options; Fewer Chances to Grow?
By Matthew Karnitschnig and Dennis K. Berman
Electronics and defense company Harris Corp. has begun exploring its strategic options, and could eventually choose to sell itself, according to people familiar with the matter.
The process could mark the end of independence for Harris, a 113-year-old company with a deep array of products and interests. With a market capitalization of $7.3 billion, Harris supplies technical infrastructure used in everything from HDTV broadcast systems and air-traffic control systems to jet-fighter radio units and cryptography equipment.
Harris, based in Melbourne, Fla., is in the early stages of the process, these people warn, and the company could decide against a sale. The company is expected to receive interest from a number of defense and general industrial companies. These could include the likes of Raytheon Co., BAE Systems PLC and Northrop Grumman Corp.
Harris has benefited greatly from defense spending in Iraq and Afghanistan, with its stock gaining 285% -- a nearly quadrupling in price -- over the past five years, compared with a 50% return for the Standard & Poor's 500 Index.
Still, a process may be a signal that Harris regards its growth opportunities as less attractive than before. After a steady rise since Sept. 11, 2001, there is an expectation that new defense spending will taper off.
Harris's appeal to potential buyers could be its mix of communications-related businesses. Spending on surveillance, remote sensors and communications equipment should stay robust even if front-line defense spending slows.
A challenge for a defense buyer would be whether to keep Harris' civil-sector businesses, particularly its television-broadcast technology.
In the 12 months ending March 28, Harris reported $5.1 billion in revenue and net income of $410 million, more than double the revenue and profit of 2004. The company trades at a price to 2009-earnings ratio of 13.27, slightly below a 14.2 multiple for communications-equipment companies and a 14.8 multiple for defense-industry firms.
The company employs about 16,000 and sells into about 150 countries.
After a big stock downturn in January, Harris shares have gradually increased, closing Thursday at $54.41 each. That is about midway in their 52-week range, which topped out at $66.94.
A Harris spokesman declined to comment.
--August Cole contributed to this article.