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Viasat (VSAT) Completes Non-Core Asset Sale to L3Harris

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Viasat Inc. (VSAT - Free Report) recently completed the divestment of its Link 16 Tactical Data Links business to L3Harris Technologies, Inc. (LHX - Free Report) for $1.96 billion. The non-core asset sale is part of the company's long-term strategy to focus on an integrated satellite services platform for global mobile, fixed commercial and government markets. The proceeds from the transaction will also enable Viasat to reduce its debt burden and strengthen its balance sheet position.

Tactical data links are highly structured, standardized and interoperable communication links used by military organizations to facilitate real-time data exchange across military aircraft, ground vehicles, surface vessels and operating bases. The acquisition of Viasat’s tactical data link product line will enable L3Harris to broaden its multi-function, multi-domain mission solutions through integration with Link 16. It will help L3Harris to expand resilient communication and networking capabilities for broader end-to-end, sensor-to-shooter connectivity across multiple domains.

About 450 employees of the divested business that generated approximately $400 million in annual sales are being transferred to L3Harris. The company will utilize about $1.8 billion of the sale proceeds to reduce its debt burden. The transaction will further enable Viasat to focus on its core operations and provide satellite communication services globally.

Viasat enjoys a leading position in the satellite and wireless communications market. With the rapid proliferation of the smartphone market and usage of mobile broadband, the user demand for coverage speed and quality has increased, which is fueling the demand for network tuning and optimization to maintain high data traffic. The company attracts millions of U.S. consumers and enterprises with its high-quality broadband service.

Encouragingly, Viasat’s blue-chip customer base, which comprises the U.S. Department of Defense, civil agencies, allied foreign governments, satellite network integrators and large communications service providers and enterprises, adds to its strength. Currently, the company’s Government Systems segment is acting as a major profit churner. Viasat is eyeing opportunities to extend broadband satellite mobility to rotary-wing aircraft, as it is a large addressable market that can emerge as a key profit churner.

In addition, the company is ramping up investments to develop its revolutionary ViaSat-3 broadband communications platform, which will boast nearly 10 times the bandwidth capacity of ViaSat-2. The ViaSat-3 platform will help form a global broadband network with sufficient network capacity to allow better consumer choices with an affordable, high-quality, high-speed Internet and video streaming service.

Viasat’s Satellite Services business is also progressing well, with key metrics including ARPU (average revenue per user) and revenues showing impressive growth. ARPU is growing on the back of a solid retail distribution network, accounting for an increasing proportion of the high-value and high-bandwidth subscriber base. Further, the rising adoption of in-flight Wi-Fi services in commercial aircraft is proving conducive to the growth of the Satellite Services business.

Viasat’s Ka-band solutions enable business jet customers to enjoy high-speed Internet connectivity from takeoff to touchdown. It empowers aviation clients to reinforce their IFC investments and helps customers stay connected with smooth web browsing and streaming services. Equipped with unrivaled speed and quality, Viasat’s Ka-band service has been specifically designed to meet the accretive demands of data backed by next-gen business applications. The Ka-band leverages global bandwidth to provide avant-garde Internet service with best-in-market pricing to boost the competitiveness of the business jet market.

The stock has lost 29.8% over the past year compared with the industry’s decline of 33.4% in the same period.

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Viasat currently carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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