Peter Schorsch
Harris Corp. is casting doubt on the future of its public-sector business in Florida after reports emerged of plans to sell one of its key satellite communications companies.
Last month, the Melbourne-based communications firm announced it would sell CapRock Communications to SpeedCast International Ltd. for an estimated $425 million.
According to SpaceNews.com, Harris explained to investors earlier this year that a sharp maritime revenue decline is expected to continue, with a 25 percent revenue drop expected in next year despite growth in the vacation cruise industry.
However, November saw Harris agreeing to a $700 million contract with the State of Florida for the creation and maintenance of a statewide communications network serving a variety of state and local government agencies such as public safety, law enforcement and public schools. The terms of the contract include a seven-year base and an option for seven yearly renewals.
Speculation on the prospective sale goes back as far as August, when James Bach of the Washington Business Journal reported that JANA Partners, LLC — the group behind the divestiture of Computer Sciences Corp’s government services sector – acquired a stake in Harris.
This move caught the interest of analysts at Moody’s Investors Service and J. P. Morgan, which suggested a possibility Harris would get rid of additional non-core assets, including its government information technology services.
Although Harris’ stated goal is to provide a secure, reliable network for voice, data and video connectivity to many of Florida’s counties and municipalities, Bach also notes it is also evident that the company is looking to shed several of its business lines.
Recently, the company reported revenue for the first quarter of fiscal 2017 of $1.75 billion, down from $1.81 billion the prior year. It was down 3 percent on a reported basis and 2 percent on an organic basis, excluding prior-year revenue because of a newly divested aerostructures business.
Bach writes: “[Harris Corp.] CEO William Brown said in August that the company would ‘dispassionately, objectively and aggressively assess which businesses strategically fit and are a better value to Harris, as well as which businesses may be a better value on their own or with a third party.’”
Over the past few years, Harris has cut loose several associated businesses: the aerostructures sale in 2016; its commercial health care business in 2015, and a broadcast communications company in 2013.
Bach says several sources in the industry expect Harris to consider selling its government information technology division – even before the CapRock sale is finalized – as part of a strategy to stabilize revenues to between $225 million and $250 million a quarter.
This plan will mean one of two things: a wholesale gutting of Harris’ government services segment or putting the division up for sale for an estimated price tag of nearly $1 billion.
Either way, Harris Corp. is now throwing more than a little uncertainty into the newly inked deal with the state of Florida to provide MyFloridaNet-2 (MFN-2) and a statewide communications infrastructure.
