Harris Corp. (HRS - Free Report) , being a member of the General Dynamics Corporation (GD - Free Report) team, has won a $140 million Space Network Ground Segment Sustainment (SGSS) contract to remodel the ground section of the satellite communications network used by NASA.
This five year contract aims to upgrade the computing and signal processing equipment, enhance reliability and maintenance, improve efficiency, and reduce operations and sustenance costs.
As per the terms of the contract, Harris will manage the replacement of all equipment and software in the space-to-ground link of the satellite communications network and will provide support for overall system engineering.
As a leading government electronics supplier, Harris is benefiting significantly from the increase in U.S. defense expenditure as well as robust market conditions for microwave communications solutions. Harris has a sustainable and diversified product pipeline with a potential market size of $15 billion. During the third quarter of fiscal 2010, the company generated $1.45 billion of new orders, up almost 40.8% year over year.
Harris enjoys a pivotal market position in the government communications sector, with a broad product line and an enviable win rate on government contracts (over 60% historically). The two defense electronics divisions (Government Communications and RF Communications) are expected to see a noticeable pickup in the next couple of years as overall defense spending is likely to remain firm as upgrading the defense communications infrastructure remains a priority.
Harris operates in a highly competitive communication equipment industry and faces intense competition from Boeing Co. (BA - Free Report) , General Dynamics Corporation and Raytheon Co. (RTN - Free Report) .
We believe Harris will benefit from soaring defense expenditure by the U.S. government, coupled with new expansion drives in the Asian, European & African markets. We currently maintain our Neutral recommendation on Harris.