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L-3 Communications Holdings Inc.’s (LLL - Analyst Report) STRATIS division has been selected as one of the six awardees for an indefinite-delivery/indefinite-quantity (ID/IQ) contract to support the U.S. Air Force Research Laboratory (“AFRL”) for its cyber initiative under the Agile Cyber Technology (“ACT”) program.

Over the next five years, the ACT program has a funding limit of $300 million. The program is a flexible as well as focused medium for cyber acquisition between AFRL, military program offices and the operational community for rapid development, prototyping, demonstration, evaluation and transition of cyber capabilities.

Air Force Research Laboratory is Air Force’s organization that is committed for the discovery, development and integration of war fighting technologies for air, space and cyberspace forces.

L-3 STRATIS is a division of National Security Solutions (“NSS”). Few days back, L-3 Communications Holdings announced the completion of 100% of a new, independent, publicly traded government services company – Engility Holdings to L-3 shareholders. Engility Holdings now trade as Engility Holdings Inc. (EGL - Snapshot Report). However, the company had retained its cyber, intelligence and security solutions business, which is known as National Security Solutions.

National Security Solutions businesses are focused on providing high-performance computing, cyber security, analytics, intelligence, physical security and IT services and offer solutions to Intelligence Community, the Department of Defense, U.S. federal civilian, state and local government agencies and international customers to combat security challenges.

Going forward, L-3 Communications has ample opportunities for growth and profit expansion after the spin-off of its Government Services businesses. The spin-off has removed a lot of uncertainty with respect to revenue and takes away some of the low margin businesses of the company. Over the longer run, we view the company as one of the best-positioned pure defense players based on its non-platform focus, broad diversification of programs and its focus on shareholder value.

However, negative offsets include the loss of key contracts, defense spending cuts and the lack of near-term catalysts. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.

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