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Originally featured on BroadcastEngineering.com
May 1

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5/1/2012 6:24 AM  RssIcon

In a move that surprised even some company insiders, Harris Corp. will divest its Broadcast Communications business and find a buyer by the summer (when it begins its fiscal 2013 year). After years of lackluster earnings due to a general slowdown in equipment sales from TV and radio stations, as well as other organizations that Harris supports, the decision to sell off the division was announced in a filing note on April 27th and make public on May 1st, 2012.

Harris is seeking a buyer for its flagging RF and video production business.

With the transition to digital mainly finished among stations in the U.S. (although it’s still occurring overseas), revenue for the Integrated Network Solutions business unit (which includes the Broadcast Communications segment) for the third quarter of fiscal 2011 was $111 million, a decline of 14% versus the same period a year ago. The company’s Board of Directors apparently decided this was too much of a burden to carry forward.

A company representative said Harris Broadcast Communications, headed up by president Harris Morris, will continue to operate as normal, with customer service and support resources in tact, until a new buyer is found. The business supplies equipment to the television, radio, digital signage and media software (traffic and billing) industries.

“The decision to divest Broadcast Communications resulted from a thorough review of our business portfolio, which determined that the business is no longer aligned with the company’s long-term strategy,” said William M. Brown, president and chief executive officer. “The plan to sell these assets supports our disciplined approach to capital allocation, and we intend to use the proceeds to return cash to shareholders and invest in growing our core businesses.”

Other than the divestiture, the Melbourne, Fla.-based company reported relatively healthy figures for the third quarter. Revenue was $1.48 billion, compared with $1.41 billion in the prior-year quarter. Orders grew 4 percent to $1.6 billion, and earnings per share exceeded estimates by 5 percent.

A local website said that as the U.S. military becomes less active in combat, Harris expects sales of tactical radios, a mainstay of the business for the past several years, to drop as well. The company is trying to develop commercial markets in law enforcement radios, foreign radio sales and the expansion of its satellite communications business.

Joe Zaller, president of market research firm Devoncroft Partners (San Diego, CA) said Harris will use approximately $200 million from the sale of the broadcast division to buy back its own stock. Harris' Brown said that Harris “fully expects that the proceeds [from the sale of the broadcast business] will be substantially higher than $200 million,” although he declined to speculate on what sum a sale might bring.

On a conference call, In response to a question from Barclays analyst Carter Copeland about the timing of the sale of the company’s broadcast business, Brown said that the divestment of the broadcast business was “Not a new topic with our board, it has been discussed quite frequently over the last several years given where broadcast happens to be… it’s been an active discussion with our board on is it a fit, how do we make it better, what is the timing if we decide to exit… we had a long conversation about it… in our view, given the tough environment that we are facing it’s important for us to focus our resources including our management time and attention on the businesses that we know to be core to our company so we can be successful into FY 2013 and beyond.”

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