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General Dynamics Acquires IPWireless

GD TXT LMT

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General Dynamics Corporation (GD - Analyst Report) completed the acquisition of IPW Holdings, a subsidiary of IPWireless Inc., for an undisclosed amount. IPW Holdings has been renamed General Dynamics Broadband and will operate as a subsidiary of General Dynamics C4 Systems.

General Dynamics Broadband produces 3G and 4G Long Term Evolution (LTE) wireless broadband network components and user devices for end-to-end systems that enable first responders and other mobile users to access lifesaving data and applications at very high speeds. The company's products improve first responders' effectiveness and safety by providing them with greater access to information.

Based in San Francisco, IPWireless Inc. supplies 3G and 4G LTE wireless broadband network equipment and solutions to first-responder and military customers. IPWireless Inc. manufactures wireless-network components, user devices and end-to-end systems that facilitate the first-responders to access lifesaving data and applications at very high speeds. It also makes tools such as real-time fingerprint identification and high-resolution video for mobile users and military customers.

This is not the first time that General Dynamics has acquired a company that provides wireless broadband network equipment. In July last year, the company had purchased Fortress Technologies, Inc., which provides secure wireless networking equipment for the U.S. military and other government customers.

As far as liquidity is concerned, the company seems to be well placed with cash and cash equivalents of $2.6 billion as of March 31, 2012. In the first quarter of 2012, the company clocked pro forma earnings of $1.70 per share, above the year-ago figure of $1.64. Earnings also beat the Zacks Consensus Estimate by a penny.

With an improving business jet market, its stable business of U.S. military vehicles, and strong cash flow generation, we expect the company to book profits going forward. However, we are concerned as the company is largely tied to the U.S. defense budget, where the threat of budget cuts is high.

Also, we have turned slightly cautious about the risks related to the execution of key projects. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.

General Dynamics mainly competes with Lockheed Martin Corporation (LMT - Analyst Report) and Textron Inc. (TXT - Analyst Report).

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