Harris Broadcast Posts Q4 and Full Year Results

Posted by Joe Zaller
Aug 03 2010

Harris Corporation reported its Q4 and full year 2010 results today.  While the company as a whole did well, the broadcast communications division continued to struggle.

For the full year, revenues from the broadcast communications division were down 17% versus the previous year.  For Q4, the company’s broadcast revenues were down just 1.9% y/y, although orders were down 12.5% versus the same period last year.

In the 4th quarter of FY 2010, Harris posted an operating loss of $21m.  According to the company, this “includes $7 million in charges related to cost-reduction actions and $6 million in inventory write-downs associated with weaker demand.”

Harris executives discussed the performance of the broadcast division in both the company’s earnings press release and on the conference call with equity analysts.

During the prepared remarks on the conference call, Harris CEO Howard Lance disclosed that:

  • Significant cost reductions were implemented in 2010 in response to the lower revenue trends, and further actions will be completed in early fiscal 2011
  • A new leadership team was put in place in this business in the fourth quarter.  This includes Doug Means,  the recently appointed GM and VP of the newly created WINS division; and Brad Turner the new Vice President of Strategy and Marketing for the broadcast communications division


Lance also highlighted three growth areas for the company’s broadcast communications division:

  • international markets – particularly the BRIC countries;
  • synergy with the company’s existing government business, where video is becoming increasingly important;
  • out of home advertising (digital signage)


Finally, Lance said the following about the revenue of the broadcast division: “we continue to expect revenue in a range of $490 million to $510 million with break-even operating results. We expect to see continued operating losses in the first half of the year with profitability improving in the second half of the fiscal year.”

The parts of the press release and the conference call that relate to the broadcast communications division have been pasted in below.


From the Earnings Press Release

Broadcast Communications
Orders in the Broadcast Communications segment were $111 million in the fourth quarter and were weaker compared with the prior-year quarter of $127 million.  Revenue in the fourth quarter was $128 million compared with the prior-year quarter of $130 million.  

Operating loss in the fourth quarter was $21 million and included $7 million in charges related to cost-reduction actions and $6 million in inventory write-downs associated with weaker demand.  Operating results reflected continuing market weakness in the traditional U.S. broadcast market as well as increased investment to address new media and international growth opportunities.  Additional cost-reduction actions are planned for fiscal 2011 and are expected to result in additional charges of about $7 million.

Orders in the fourth quarter included $9 million for turnkey, high-power AM radio transmitter systems for the Pakistan Broadcasting Corporation funded through USAID; $4 million for the Korean Broadcasting System for high-powered AM radio transmitters; $3 million for Viditec S.A. in Argentina to begin to deploy the country’s first digital terrestrial transmission system; and $3 million for TCN Channel Nine PTY LTD. in Australia to continue to build out the company’s playout and news centers.


From the Conference Call:

The Broadcast Communications segment continued to underperform in the fourth quarter. Revenue of $128 million was in line with recent quarters, but fourth quarter orders were sequentially lower at $111 million. Segment operating income was a loss of $21 million in the quarter. This did include $7 million coming from restructuring costs and $6 million coming from inventory write-downs. Fourth quarter results reflected the continued weak U.S. market capital spending trend.

For the full fiscal 2010, Broadcast Communications revenue declined almost $100 million or 17% from fiscal 2009. The decline was led by $60 million in lower revenue in our transmission systems product line.

Significant cost reductions were implemented in 2010 in response to the lower revenue trends, and further actions will be completed in early fiscal 2011. But we cannot rely entirely on cost-reduction actions to deliver improved financial results.

A new leadership team was put in place in this business in the fourth quarter. We believe that continuing to invest in the growth markets of the future is the right strategy. Although we are investing at a time when the legacy market has continued to decline, this is the means to make this business a long-term success and a positive contributor to the company’s future financial results.

Let me highlight today three growth areas. First, international markets, including the BRIC nations of Brazil, China, India and Russia along with other countries in Latin America, Asia Pacific and Africa, offer us significant growth opportunities. Their transition from analog to digital broadcasting is still just getting started. There’s growing demand for both digital transmission systems and the related infrastructure that goes with it. In response, we recently launched transmitter production at new factories in Brazil and China using manufacturing partners. The regional presence will increase our market share and reduce our product cost.

The second area is the U.S. government market for full-motion video systems continues to grow. Harris has a strong market position with unique technology capabilities in this area. Our FAME solution, short for Full Motion Video Asset Management Engine, offers unequalled performance and scalability as our government customers cope with increasing amounts of digital intelligence, surveillance and reconnaissance information. Several FAME systems have been deployed, and we’re receiving positive customer feedback.

Third, the growth of digital out-of-home advertising continues. Our solutions enable advertisers to reach consumers on the move. New systems will be increasingly deployed to deliver rich media content in live sports and entertainment venues, retail establishments and to mobile handheld devices.

At the recent Infocom Trade Show, Harris demonstrated an array of innovative digital audio video solutions which integrate digital signage hardware and software, production play out and scheduling systems, multi-viewers and graphic engines. Harris is uniquely positioned to offer end-to-end solutions and services, which enable customers to implement efficient media workflows and create new revenue streams. These market initiatives, along with the broader end market recovery, will drive improved top line revenue and bottom line results in fiscal 2011 and beyond in this segment.

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