From S+P yesterday:
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Microwave Communications We believe double-digit sales increases in the video distribution infrastructure and digital media solutions business areas should continue as Harris' customers upgrade to digital and high-definition broadcast operations. Radio transmission systems revenue should be higher, in our view, led by shipments of HD radio systems in North America, which offset TV transmission systems and software systems' potential revenue decline.
The microwave communications segment (10%) designs, manufactures, sells, and services microwave radio products, primarily for cellular network providers and private network operators. Harris closed on an agreement in January, 2006, to separate its microwave communications segment and combine it with Stratex Networks. The new company is named Harris Stratex Networks (HSTX). The company is the majority shareholder of the new company with a 56% ownership interest. Harris Corp. will consolidate the results of Harris Stratex Networks and reflect the minority interest for the 44% it does not own beginning in fiscal 2007's third quarter.
For Harris Stratex, we see orders outpacing sales for the company's international customer base. Driven by the deployment of 3G services and network expansions, we expect the Europe, Middle East, and Africa region to continue to dominate orders compared to the microwave segment's other regions. The combined company will be able to reduce operating costs and drive wider operating margins, in our opinion.
Last Year's Awards Pay Off Following a 16% increase in fiscal 2006, we expect company-wide sales to advance at a mid-teens rate for fiscal 2007 and fiscal 2008. This reflects our view of strong government-related product demand from increased spending to support the war on terrorism, as well as improved demand for the RF communications unit. We believe these markets will remain a key driver of growth, along with the growing broadcasting communications business.
We think sales growth will benefit from the impact of major governmental contract and service provider awards from last year and upcoming proposed contracts. In our view, the January, 2007, combination of the microwave unit with Stratex Networks will benefit Harris as a majority owner.<snip> |
