Gilat to bid in $5b US armed forces tender
Potential revenue for Gilat from the tender amounts to tens of millions of dollars.
Roy Meltzer 16 Jan 06 17:40
Sources inform "Globes" that Israeli company Gilat Satellite Networks (Nasdaq: GILTF; TASE: GILTF) will bid in a $5 billion US armed forces tender for satellite communications systems. It is difficult at this stage to evaluate Gilat’s chances, if any, of winning the tender, and the revenue it would receive in the event it wins. Since, however, Gilat is one of the world’s three leading companies making very small aperture terminals (VSATs), the equipment in the tender, its potential revenue is likely to amount to at least tens of millions of dollars.
The US armed forces plan to use the satellite communications systems it procures mostly for missions in Iraq. In the past few days, the Armed Forces issued a request for proposal (RFP) for supplying the systems. It is believed that pricing among the bidders will take place over the coming year.
According to the tender, the armed forces need the following global positioning systems (GPS) and satellite systems for vehicles facilitating continuous communication between field units for purposes of various applications. The tender is part of a five-year procurement plan by the armed forces and the US Department of Defense. The plan is to buy six satellite systems from 4-6 different bidders, who will provide a basket of solutions, including hardware, software, and support and maintenance services for the systems. The armed forces will also sign contracts with two small subcontractors meeting the tender terms. Gilat will bid in this section of the tender.
Given the tender terms, the RFP for the large suppliers is irrelevant to Gilat; it is designed for heavy equipment suppliers, such as US company Lockheed Martin (NYSE: LMT), which can offer the required full basket of solutions. At the same time, it is believed that Gilat will bend all its efforts to becoming one of the subcontractors. Gilat’s main competition is expected to come from Hughes Space and Communications (HSC) and ViaSat (Nasdaq: VSAT).
A source close to Gilat said that the most likely possibility is that Gilat will combine with a large company in the tender as a supplier of VSAT dishes. At the same time, in view of Gilat’s lack of experience in working with the US military, the company has found it difficult to evaluate its chances of success. The source agreed, however, that the revenue potential was considerable, despite the low profitability typical of the military sector.
Published by Globes [online] - www.globes.co.il - on January 16, 2006
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