Harris Corporation Shuts Down Cyber Integrated Solutions Business

Posted by Joe Zaller
Feb 27 2012

Harris Corporation, announced that it plans to discontinue its Cyber Integrated Solutions (CIS) operation — which provided remote cloud hosting — and sell its related data center facility in Harrisonburg, Virginia.

According to the company’s 8-K filing with the SEC, the company expects to incur total estimated pre-tax charges of $113 million to $129 million ($70 million to $80 million after-tax), almost all of which are expected to be reflected in the company’s results for the third quarter of fiscal 2012. These estimated pre-tax charges are expected to be comprised of approximately $109m to $125m in impairment of long-lived assets; $1m in one-time employee termination costs, including severance and other benefits; and $3m in other associated exit or disposal costs. Harris expects that approximately $4m of these estimated pre-tax charges will result in future cash expenditures. The company expects to complete these exit and disposal activities by the end of its fiscal 2012.

The CIS operation is part of the company’s Integrated Network Solutions (INS) segment, which was formed last year when Harris strategically realigned its business segments.  In its most recent earnings release, Harris said that the CIS business lost money last quarter, impacting the overall results of the INS segment.

Significantly, the Harris INS segment also includes the company’s Broadcast & Communications Division, and there is speculation about whether the broadcast business may be spun off by the parent company after comments made by new Harris CEO William Brown.

As previously written, Brown said on the company’s most recent earnings call that although the Harris broadcast business performed well during the quarter, with revenue and operating income both up year-over-year, the company’s broadcast business still has work to do. “In Broadcast, we bought several companies over the years which were never fully integrated. While we continue to see good traction on the top line, our cost structure, driven by complexity, lack of productivity and growth investments, isn’t where we need it to be and it’s preventing us from achieving acceptable returns. Our team is now laser-focused on developing a strategy for this business that maximizes shareholder value.”

This comment led Cowen & Company research analyst Gautam Khanna to ask Brown whether Harris might be open to “maximizing shareholder value” in the broadcast sector, if this space does not align well with the company’s 3-5 year strategy.

Brown responded by saying that Harris is “taking a fresh look in the environment that we’re in across all of our businesses with a special focus on cash, on cost, some of the structural cost. Some of the structural cost reductions will come through some investment, which we’ll know over the coming months. We’ll give you some insights as we go through the quarter if there’s anything that’s notable that needs to be released, or at our third quarter call later in the year. But to comment on what’s in or out of the portfolio, we’re taking a fresh look at all the pieces, and that includes all the business that we happen to be in today.”

 

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Related Content:

Press Release: Harris Corporation to Discontinue Cyber Hosting Operation; Will Continue Providing Advanced Cyber Security and Cloud-Enabled Applications and Services

Harris 8-K Filing with SEC Detailing Shutdown of CIS Business ­

Harris Broadcast Revenue and Income Rise in Q2 2012, Says It’s Laser Focused on Maximizing Shareholder Value

Press Release: Harris Corporation Reports Fiscal 2012 Second Quarter Results

Harris Corporation Q2 FY 2012 Conference Call Transcript

Harris Fiscal 2012 Second Quarter Earnings Call Presentation

Previous Quarter: Harris Reports Q1 2012 Results, Says Broadcast Revenue Increasing

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3 Responses

  1. […] affirmatively that such an approach can lose large sums of money. Just recently, Harris Corp, cut its losses on its ‘buy-big and centralize’ hosted cloud strategy. It turns out that large-scale […]

  2. […] unexpected; the unit has underperformed in recent years. Harris President/CEO William M. Brown had previously hinted at his concerns regarding the division. Then, in February, the Integrated Network Solutions unit, […]

  3. […] move was by no means unexpected; Harris President/CEO William M. Brown had previously hinted at his concerns regarding the division. Then, in February, the Integrated Network Solutions unit, […]

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