Harris Corp. gears up to boost growth on European continent

An effort by some Eastern European countries to modernize their militaries has proven to be fruitful for Harris Corporation, CEO Bill Brown said in an earnings call Wednesday.

The company hopes to capitalize on its telecommunications division’s strength and bid on what Brown called a “substantial upgrade” of the United Kingdom’s so-called Morpheus program.

Morpheus is a full-scale upgrade to what the British government calls a “next-generation” communications system.

“Over time, we know there will be substantial upgrades in the U.K.,” Brown said. That could mean “some meaningful revenue for Harris.”

The company previously has landed upgrade contracts in Poland and Romania.

Countries in Latin America could also represent potential sales when they modernize, he said.

Brown’s remarks came as the company reported quarterly year-over-year revenue growth from $170 million to $172 million. Net income in the quarter, however, dropped from $168 million a year ago to $85 million this year.

The company’s stock price took a roller coaster ride Wednesday. It opened at $109.54 per share before dropping as low as $108.71 at 11:20 a.m. and rising as high as $110 per share. The stock closed the day slightly down at $109.25.

Part of the net income drop was blamed on a shifting U.S. Department of Defense budget, which affects the company’s communication-systems division.

“The budgets are just becoming revealed,” Brown said.

In early versions of his budget, U.S. President Donald Trump has indicated increased defense spending — which could also provide Harris and other local contractors such as Lockheed Martin or Northrop Grumman with opportunities.

“It certainly shows the Department of Defense with substantial growth,” he said. He added: “We think the intelligence budget will come up.”

It remains unclear, however, what effect other areas of Trump’s first several months will have on Harris.

In March, Trump mentioned the possibility of privatizing the air-traffic control industry. That could affect companies such as Harris that have landed considerable work in that sector.

The Federal Aviation Administration is one of Harris’ largest customers, Brown said.

“We have the base [FAA Telecommunications Infrastructure] program, which has been very stable and going on for a long period of time,” he said. “There has been a lot of debate and it’s not a new debate. What is different now is that it appears the administration is getting behind privatization.”

He said any decisions are still several years away and that company officials “feel good” about what the end result might be.

Harris has prioritized the sale of its government information technology services division to the New York-based private-equity firm Veritas Capital. The $690 million deal was first announced in January.

The company employs about 6,000 people in Central Florida, with its headquarters in Melbourne.