Posts Tagged ‘Harris BCD’

Harris Broadcast Names Charlie Vogt CEO

Top Broadcast Vendor Brands | Posted by Joe Zaller
Jul 09 2013

Harris Broadcast announced it has appointed Charlie Vogt as CEO.

A 25-year veteran of the IT and communications industry,  Vogt joins Harris Broadcast following nine years as president and CEO of GENBAND where he led a company transformation that encompassed six acquisitions, including Tekelec SSG, NextPoint Networks and Nortel’s VoIP Business. Through successful organic innovation, attention to operational integration and relentless focus on customers, GENBAND became no. 1 in VoIP and delivered a compound annual growth rate of ~100 percent during his tenure

Charlie Vogt -- Harris Broadcast CEO

 

Vogt succeeds Harris Morris, who was appointed president of Harris Broadcast when it was a subsidiary of Harris Corporation in 2010, led the company through its divestiture process and guided the transition period to The Gores Group ownership, including the completion of fiscal year 2013.

“Charlie’s proven track record of taking companies with powerful and promising technology to the next level uniquely positions him to lead this business,” said Carl Vogel, Harris Broadcast Chairman and board member of Dish Network. “His decision to join Harris Broadcast as President and CEO likewise reflects the promise and potential behind the company’s market-leading technology, marquee customers and exceptional employees. Charlie will bring to Harris Broadcast vision, leadership, creativity and operational discipline as well as an entrepreneurial and customer-first culture.”

Mr. Vogel added: “The radio and TV broadcasting industry is embarking on a significant transformation from digital to IP. Charlie was a natural choice as his IP domain knowledge and experience gained while assisting global service providers and cable operators transition to IP has uniquely prepared him to lead the company as this industry undergoes a similar trajectory. We thank Harris Morris for his contributions in guiding Harris Broadcast as we acquired the business and transitioned the company to independence – we wish him well as he pursues new opportunities.”

“I couldn’t be more enthusiastic about joining Harris Broadcast, especially at a time when broadcasters, cable networks and multi-channel content distributors are experiencing so much change – from the impact of on-demand to content delivery on multiple screens and the digital transition to video and audio over IP,” said Mr. Vogt. “I have spent my professional career building businesses, fostering an entrepreneurial culture and introducing disruptive technologies that transform business models. I look forward to leading the Harris Broadcast team to accelerate innovation in areas that will enable the company to experience market-leading growth.”

Mr. Vogt added: “Through investments in R&D and strategic acquisitions, Harris has built the industry’s most comprehensive portfolio of content management technology. The company is well positioned in the broadcast market with unique capabilities such as combining automation, digital asset management, playout and sales and scheduling into a single solution. These strategic assets form an ideal foundation upon which we will invest and differentiate.”

Appointed CEO of GENBAND in 2004, Mr. Vogt expanded GENBAND’s operations to more than 50 countries and secured 80 of the top 100 communications service provider and cable operators as customers. While leading an industry wide transition to IP, he also advised the Federal Communications Commission Chairman on matters of technology and spectrum serving on the FCC advisory council. Mr. Vogt has received industry wide recognition for his leadership, operational acumen and tangible accomplishments including Ernst & Young’s “Entrepreneur of the Year,” Dallas Metroplex Technology Business Council CEO of the Year, Global Telecom’s “Power 100” and Light Reading’s top 10 “movers & shakers.” In September 2012, The Wall Street Journal named GENBAND the no. 1 privately funded company in America topping a list of 5,900 companies.

Prior to his tenure as President and CEO of GENBAND, Mr. Vogt served as President and CEO of Taqua, an IP switching company, which was acquired by Tekelec in 2004. Before Taqua, Mr. Vogt was instrumental in the operational and financial growth of four standard-setting technology companies including ADTRAN, Ascend Communications, Accelerated Networks and Santera Systems. ADTRAN, Ascend Communications and Accelerated Networks executed IPOs, while Santera Systems was acquired. Following Lucent Technologies’ $20 billion acquisition of Ascend Communications in 1999, Mr. Vogt became a senior member of the leadership team.

Mr. Vogt has served as chairman of two companies and as a board member of five companies, in addition to serving on the board of Telecommunications Industry Association, the Federal Communications Commission Advisory Council and the Dallas Metroplex Technology Business Council. He holds a Bachelor’s Degree in Economics and Computer Science from Saint Louis University, where he also played Division I NCAA baseball.

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Related Content:

Press Release:  Harris Broadcast Names Charlie Vogt CEO

Harris Broadcast CEO to Part Ways with Company

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Harris Broadcast CEO to Part Ways with Company

broadcast technology market research | Posted by Joe Zaller
Jul 02 2013

Harris Broadcast said today that its CEO, Harris Morris, who led the company through its divestiture from Harris Corporation and subsequent acquisition by the Gores Group, will part ways with the company on July 3rd 2013.

The news was disclosed via an email sent to all Harris Broadcast staff by company chairman Carl Vogel.

No reason was given for Morris’s departure.

The company will name a new CEO on Tuesday July 9, 2013.

 

The text of Vogel’s email can be found below:

 

 

 

Date:        Tuesday July 2, 2013

To:          Harris Broadcast Employees 

From:        Carl Vogel, Chairman of the Board

 

“This is to inform you that, based on discussions with the board of directors of Harris Broadcast, Harris Morris is transitioning from the Company, effective end of day tomorrow.

“We thank Harris for his contributions to the company over his tenure and for guiding Harris Broadcast through the end of the fiscal year in its transition to an independent company. We wish Harris well as he pursues new opportunities.

“We are excited about the future and look forward to the next chapter for Harris Broadcast. As such, we will be announcing the new CEO to the company on Tuesday, July 9th

 

 

 

Morris joined the Harris Broadcast & Communications (BCD) business unit in January 2008 as VP software systems.  He became president of Harris BCD in February 2010.

In February 2013, Morris was named CEO of Harris Broadcast when it became an independent company following the purchase of Harris BCD by the Gores Group from Harris Corporation.

Prior to his time at Harris, Morris was chief strategy officer at Thomson Learning; and was a partner and vice president for Bain & Company, a global business consulting firm. In his 13 years with Bain & Company, he helped a wide variety of global clients analyze markets, develop growth strategies, expand into international markets and drive operational efficiencies.

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Related Content:

Harris Corp Completes Sale of Broadcast Business to The Gores Group

ASSET SALE AGREEMENT by and between HARRIS CORPORATION and GORES BROADCAST SOLUTIONS, INC. Dated as of December 5, 2012

Harris Corporation to Sell Broadcast Business to The Gores Group for $225 Million

Analyzing the Sale of the Harris Broadcast Division

Harris Corporation To Divest Broadcast Business

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© Devoncroft Partners 2009 – 2013. All Rights Reserved.

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Harris Corp Completes Sale of Broadcast Business to The Gores Group

Broadcast Vendor M&A, SEC Filings | Posted by Joe Zaller
Feb 04 2013

Harris Corporation has completed the sale of its Broadcast Communications Division (Harris BCD) to The Gores Group, a Los Angeles based private equity firm.

Contractual details of the Asset Sale Agreement between Harris and The Gores Group can be viewed here.

The completion of the deal means that Harris Corp is now officially out of the broadcast business, after 50+ year run as one of the broadcast industry’s most significant technology vendors.  However, it appears that, for now at least, BCD will continue to be called Harris Broadcast.

Harris Morris, CEO of Harris Broadcast said “This is an exciting new chapter for Harris Broadcast, our employees and our customers. The Gores Group is an ideal fit to help us move the business forward and help drive innovation, streamline operations and improve customer service. They will also provide us additional resources such as a flexible capital base and introduce new talent to the Company.”

Carl Vogel, a veteran of the cable television and satellite industry, is a senior advisor to The Gores Group and will be a member of the Gores team providing advice and strategic guidance to the Company.

Ryan Wald, Managing Director of The Gores Group added, “We anticipate great things from Harris Broadcast. The Company has proven technology, great products and an outstanding team. With our equity capital and guidance we are confident that Harris Broadcast will transition to a strong independent company that will continue to develop and deliver market leading technology and service to its customers.”

The headline valuation of the deal was $225m, comprised of “$160m in cash, a $15m subordinated promissory note and an earnout of up to $50m based on future performance.”  According to a Harris 8-K filing with the SEC, the terms of the earnout state that in each of the four calendar years from 2013 through 2016, Harris Corporation will receive a contingent payment (in cash) of twenty percent of the revenue of Harris BCD that is in excess of a specified target revenue amount. The target revenue amount required to trigger the contingency payment to Harris Corporation was not specified, so it is difficult to judge how likely it is that the payment will be triggered. This contingent payment amount is subject to an annual cap of $25m in each calendar year (2013 – 2016).

The price paid by Gores for BCD is lower than what Harris executives previously indicated they hoped to achieve.  As a result, Harris Corp recently recorded a non-cash impairment charge of $98m relating to the sale of BCD. This is fourth time the company has written down the value of BCD during the sale process.

Following the most recent write-down of BCD’s book value, the company was contacted by SEC staff regarding the timing of the impairment charges relating to BCD. According to a filing with securities regulators, Harris provided the SEC with the following explanation:

“As of our June 29, 2012 year-end, we wrote down the carrying value of Broadcast Communications (“BCD”) to $461 million, which represented the lower of carrying value ($461 million) or estimated fair value of $490 million less estimated costs to sell of $26.5 million (or $463.5 million). With the assistance of a third-party valuation consultant, we estimated the fair value at that time to be $490 million based on discounted cash flow analysis and an analysis of sale transactions and public company market multiples for companies in markets similar to BCD. This analysis yielded estimated fair values ranging from $487 to $496 million, and included assumptions that reflected expected conditions in the markets BCD operates in. Our analysis was corroborated by a valuation summary prepared by the investment banker we engaged to assist with the sale of BCD and preliminary indications of value from potential purchasers of BCD which we received in early August 2012. Accordingly, we believe the net assets of BCD were appropriately valued at June 29, 2012.

“Unexpected changes in facts and circumstances caused us to conclude impairment indicators were present relative to BCD at the conclusion of our first fiscal quarter ended September 28, 2012. As a result of weaker than expected market conditions and general uncertainty in the market surrounding the BCD sale process, BCD unexpectedly reported lower than forecasted revenue, operating income and cash flows for the first quarter of fiscal 2013. BCD’s lower first quarter results and a lower confidence level in BCD’s ability to meet future financial forecasts resulted in lower preliminary bids from interested parties received during the last week of October ranging from $175 to $310 million. Further, we updated our discounted cash flow analysis as of September 28, 2012 by adjusting our assumptions of expected revenues, operating income and cash flows. Specifically, we reduced our revenue projections, increased projected working capital requirements and applied higher discount rates to reflect greater uncertainty surrounding BCD’s current and future expected financial results. As a result of the lower preliminary bids, our updated discounted cash flow analysis and a revised valuation summary prepared by our investment banker, we reduced the carrying value of BCD as of September 28, 2012 to $287.2 million (estimated fair value of $300 million, less estimated selling costs of $12.8 million), resulting in a non-cash impairment charge of $216.5 million.”

 

Recent Performance of Harris BCD

According to a recent 10-Q filing with the SEC, Harris said its discontinued operations, the vast majority of which relate to BCD performed as follows:

 

 Results of Harris Discontinued Operations Through Fiscal Q2 2013

 

Looking to the Future of Harris Broadcast

Now under new ownership, Harris Broadcast remains one of the largest vendors in the broadcast technology space.  The completion of deal means the company can now put behind it the uncertainty that has surrounded it since Harris Corp announced its intention to divest the business. As an independent company Harris Broadcast can now focus entirely on its core business and execute its strategy for growth and profitability.  It will be interesting to watch the actions the company takes between now and the 2013 NAB Show, which will be the first major public appearance of the new company.

 

 

Related Content:

Harris Corp Press Release: Harris Corporation Completes Sale of its Broadcast Communications Business to The Gores Group

Gores Group Press Release: The Gores Group Completes Acquisition of Harris Broadcast Communications

Harris Corp 10-Q Filing for the Quarterly Period Ended December 28, 2012

ASSET SALE AGREEMENT by and between HARRIS CORPORATION and GORES BROADCAST SOLUTIONS, INC. Dated as of December 5, 2012

Harris Corporation — Correspondence with SEC Regarding Write-Down of the Value of Harris BCD

Harris Corp Reports Q2 2013 Earnings, Writes Down Value of Broadcast Business by Additional $98 Million, Expects BCD Sale to Close in February

Harris Corporation Discloses Structure of Promissory Note and Earnout Provision in Sale of Broadcast Communications Division

Harris Corporation to Sell Broadcast Business to The Gores Group for $225 Million

Harris Corp Announces Q1 FY 2013 Results, Further Writes Down Value of Broadcast Business

Harris Corporation To Divest Broadcast Business

Analyzing the Sale of the Harris Broadcast Division

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Harris Corp Reports Q2 2013 Earnings, Writes Down Value of Broadcast Business by Additional $98 Million, Expects BCD Sale to Close in February

Broadcast technology vendor financials, Broadcast Vendor M&A, Quarterly Results, SEC Filings | Posted by Joe Zaller
Jan 29 2013

Against a backdrop of what CEO William Brown called a “very difficult and uncertain government spending environment,” Harris Corporation announced that its revenue in the second quarter of fiscal 2013 was $1.29Bn compared with $1.31Bn during the same period a year ago.

GAAP income from continuing operations was $142m, or $1.25 per diluted share, compared with $136m, or $1.18 per diluted share.

Harris had little to say about its Broadcast Communications Division (BCD) other than the fact that it has “entered into a definitive asset sale agreement with Gores Broadcast Solutions, Inc., an affiliate of The Gores Group, LLC, relating to the sale of Broadcast Communications.”

The company also disclosed that it recorded a non-cash impairment charge of $98m relating to the sale of BCD.

Harris has written down the value of BCD on three previous occasions. The most recent write-down was in October 2012 when the company said that based on “recent indicators of value during the first quarter of fiscal 2013, including market, financial performance and indications of value from interested parties,” it had recorded non-cash impairment charges in discontinued operations totaling $222m. Harris said that the “vast majority” of this write-down was related to BCD, with only about $6m attributed to the company’s Cyber Integrated Solutions business, which was also discontinued in 2012.

At that time, Brown said that as a result of this charge, Harris had put a net book value of $287m on Harris BCD, which he said provided an “indication of the value we expect to receive” from the sale of the broadcast business.

When Harris announced the deal to sell its broadcast business to PE firm the Gores Group in December 2012, the company put a headline value of $225m on the transaction, or $62m lower than the value Brown had telegraphed to the market two months earlier.

However, through the BCD sale press release and a subsequent regulatory filing with the SEC, Harris disclosed that the terms of its deal with the Gores Group was made up of “a cash payment of $160m, a $15m subordinated promissory note (payable 15 months after closing), and an earnout of up to $50m based on future performance.”

Today’s disclosure that Harris has recorded an additional $98m impairment charge against the value of BCD, means the broadcast business is now valued on its books at $189m. This implies that after receiving the $160m cash payment, and the payment of the $15m promissory note ($16.125m with interest), Harris is not being overly optimistic that it will receive the full potential value of the earnout provision.

Nevertheless, Harris CFO Gary McArthur told analysts that the company “continues[s] to plan to purchase an additional $200 million in shares upon the successful conclusion of the broadcast sale,” something that both McArthur and Brown have reiterated since announcing the intent to divest BCD in May 2012.

McArthur also said that the company expects to close the sale of BCD in early February 2013, thereby ending the company’s 50+ year run as one of the broadcast industry’s most significant technology vendors.

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Related Content:

Press Release: Harris Corporation Reports Fiscal 2013 Second Quarter Results

Harris Corporation Discloses Structure of Promissory Note and Earnout Provision in Sale of Broadcast Communications Division

Harris Corporation to Sell Broadcast Business to The Gores Group for $225 Million

Harris Corp Announces Q1 FY 2013 Results, Further Writes Down Value of Broadcast Business

Harris Corporation To Divest Broadcast Business

Analyzing the Sale of the Harris Broadcast Division

Harris Corporation Shuts Down Cyber Integrated Solutions Business

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Harris Corporation Discloses Structure of Promissory Note and Earnout Provision in Sale of Broadcast Communications Division

Broadcast Vendor M&A, SEC Filings | Posted by Joe Zaller
Dec 06 2012

When Harris Corporation announced earlier today that it had signed an agreement to sell its Broadcast Communications Division (Harris BCD) to The Gores Group (TGG), the company said that the terms of the deal included “a cash payment of $160m, a $15m subordinated promissory note, and an earnout of up to $50m based on future performance.”

Harris Corp subsequently issued a regulatory filing that provides more detail on the promissory note and the terms of the earnout.

The $15m subordinated promissory note is payable fifteen months after closing, accrues simple annual interest at six percent, and is unsecured.

The terms of the earnout state that in each of the four calendar years from 2013 through 2016, Harris Corporation will receive a contingent payment (in cash) of twenty percent of the revenue of Harris BCD that is in excess of a specified target revenue amount.

The target revenue amount required to trigger the contingency payment to Harris Corporation was not specified, so it is difficult to judge how likely it is that the payment will be triggered.

This contingent payment amount is subject to an annual cap of $25m in each calendar year (2013 – 2016).

In the event that Harris BCD’s revenue would have caused the contingent payment in any such year to exceed $25m, the contingency payment will be carried forward and credited as revenue in the next year.

The total value of the contingency payment cannot exceed $50m over the period of the agreement.

Harris said that the target amount required to trigger the contingency payment could be lowered in the event of a sale or divestiture by TGG of parts of Harris BCD including a business unit, product line or substantial portion of its consolidated assets.

These provisions are not uncommon in M&A deals.  Indeed when Technicolor sold Grass Valley to Francisco Partners in 2010, a similar arrangement was put in place.

Under the terms of the Technicolor deal with Francisco Partners:

  • An $80m promissory note was issued to Technicolor with a six-year maturity and bearing a capitalized interest of 5% per year
  • Technicolor has the right to receive “additional consideration from [Francisco Partners] based on the potential future remuneration of the new owners of the disposed entity.”  However the amount of remuneration was not disclosed.

 

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Related Content:

Harris Corporation to Sell Broadcast Business to The Gores Group for $225 Million

Harris Press Release: Harris Corporation to Sell Broadcast Communications to The Gores Group for $225 Million

Harris Corporation 8-K Filing

 

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Harris Corporation to Sell Broadcast Business to The Gores Group for $225 Million

Broadcast Vendor M&A | Posted by Joe Zaller
Dec 06 2012

Harris Corporation said today that it has signed an agreement to sell its Broadcast Communications Division (Harris BCD) to The Gores Group (TGG), a Los Angeles-based private equity firm, for $225m.

Under the terms of the deal, The Gores Group will pay $160m in cash a $15m subordinated promissory note and an earnout of up to $50m based on future performance. The deal is expected to close in early calendar year 2013.

The deal price is  below the $287m valuation that Harris Corp recently said it had on its books for BCD following three successive write-downs of BCD.

“The sale of Broadcast Communications reflects our strategy to optimize our business portfolio and focus on our core businesses,” said Harris Corporation CEO William Brown.

The upfront cash portion of the deal is below the amount that Brown had previously telegraphed to the market.  When the sale of BCD was announced in May 2012, Brown said that he expected to receive “substantially more” than $200m for BCD, and that the company would the first $200m from the sale of BCD to shareholders, and use the residual to invest in the company’s core defense business.

Brown addressed this in a statement, saying “As previously communicated, we plan to repurchase up to $200 million of our shares after the deal closes. This is in addition to the $200 million of share repurchases already planned for fiscal 2013 and reflects our ongoing commitment to effectively deploy capital, including returning cash to shareholders.”

According to its website, The Gores Group has $3.3 billion in assets under management and “specializes in acquiring businesses that are undergoing change in capital structure, strategy, operations or growth and can benefit from Gores’ operational and strategic approach.” TGG says it “targets companies with a defensible core business, mature products or services, sustainable revenues, established customer relationships, and that have reached a transition point in their lifecycle presenting an opportunity for transformation.”

“In Harris Broadcast Communications, we are investing in a proven technology leader with great products and a great team. We are excited to provide the capital and support to transition this division to a strong and independent company further enabling it to continue developing and delivering market leading technologies to its customers,” said Ryan Wald, Managing Director of The Gores Group.

The announcement did not disclose whether current management would remain in place, or for how long Harris BCD will continue to have the right to use the Harris name.  However Wald’s statement that TGG is investing in a great team implies current Harris BCD president Harris Morris is likely to remain at the helm of the company.

The announcement comes after months of intense rumor and speculation, which began in May 2012 when Harris Corporation announced its intention to divest its broadcast business, saying BCD was no longer considered a core asset to the defense contractor’s overall business.

At that time, Harris Corporation CEO William Brown summed up the company’s reasons for wanting to sell-off BCD: “The combination of a lack of effective integration by the company over the last decade, coupled with a market outlook that is not as promising today as once believed led us to believe that the business is best owned by another party.

The structure of Harris BCD today is the result of a decade-long M&A program, which transformed the company from a leading provider of radio and television transmitters into one of the largest pure-play broadcast technology vendors. According to a TVNewsCheck article, Harris spent close to $1 Billion on M&A since 2000, including the acquisitions of Louth, Encoda, and Leitch.

A May 2012 analysis of the sale of the Harris broadcast business showed that the company has approximately 1,700 employees and had revenue of approximately $375m through the third quarter of FY 2012, essentially flat with the previous year.  It is believed that Harris BCD had revenue of approximately $500m for the full FY 2012, which ended on June 30, 2012, down about 10% versus the previous year.

 

Deal Valuation Below Book Value

The $225m valuation of BCD is below Harris Corp’s internal valuation of BCD, which the company said during its most recent earnings announcement that it had lowered to approximately $287m based on “recent indicators of value during the first quarter of fiscal 2013, including market, financial performance and indications of value from interested parties.”

At that time, Brown said this lowered internal valuation gives an “indication of the value we expect to receive” from the sale of Harris BCD.

The recent write-down of BCD is the third time in the last six months that Harris has taken a non-cash impairment charge against the value of BCD.

In May 2012 when Harris Corp announced its intention to divest BCD, the company said it “recorded in the third quarter a non-cash charge of $407m after-tax, or $3.62 per diluted share, to write down a significant portion of the goodwill and other long-lived assets in Broadcast Communications, resulting in the GAAP loss from continuing operations.”  Information about how Harris Corp calculated this write-down was published in the company’s Q3 FY 2012 10-Q filing.

Harris subsequently disclosed a second BCD impairment charge of $23.6m in August 2012 as part of the company’s annual 10-K filing with the SEC, which said:

 “Due to the length of time necessary to measure the impairment of goodwill and other long-lived assets, our impairment analysis [of BCD] was not complete as of the end of the third quarter of fiscal 2012. In the fourth quarter of fiscal 2012, we completed our impairment analysis and, as a result, recorded a $23.6 million ($10.5 million after-tax) increase to our initial estimated impairment charge. The portion of the total $447.6 million impairment charge related to goodwill was $395.6 million, a minor amount of which was deductible for tax purposes.”

 

Potential Implications of the Deal for the Broadcast Industry

The fact that Harris BCD was acquired by a private equity firm with no previous experience in the broadcast technology space has interesting implications for both Harris BCD and the broadcast technology landscape as a whole.

Since Harris Corp announced its intention to sell the broadcast unit, many names have been bandied about as potential buyers of BCD — ranging from established industry players such as Grass Valley (via their PE owner Francisco Partners), to large “strategic buyers” with some existing activities in the broadcast industry (similar to Belden’s purchase of Miranda Technologies earlier this year), to private equity players.

Now that the buyer has been announced, the next question is whether The Gores Group will use BCD as a platform for further expansion into the broadcast industry (as Belden said it would do with Miranda), or break BCD up and sell it off.

Time will tell.

 

What’s Next For Harris Corp?

Having found a buyer for BCD, Harris Corporation can now concentrate on its core defense business.  This was one of the primary factors cited by Brown when he announced the plan to sell BCD in May 2012, saying to equity analysts: “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.”

However, things are getting tougher in the defense business due in large part to hundreds of millions of dollars in mandatory budget that are scheduled to take effect in early 2013. This has put pressure on Harris Corp.  According to a recent Associated Press article Lazard Capital Markets analyst Michael Lewis downgraded his rating on the company’s stock, citing worries about weaker revenue due to reduced government spending.

This may make Harris Corp a potential takeover target.  Indeed, according to a recent Reuters article, the collapse of the proposed $45 Billion merger of defense giants BAE and EADS “will shift the focus to smaller deals among global weapons makers as companies strive to keep revenue rising in the face of cuts in military spending by the United States and Europe.  Instead, major defense companies likely will focus on possible combinations with smaller players such as Rockwell Collins, L-3 Communications Holdings Inc, SAIC Inc, ITT Exelis and Harris Corp, according to interviews with more than a dozen industry executives and bankers.”

Given the environment, one has to wonder whether the divestiture of BCD is a precursor of an eventual sale of Harris Corporation itself to a larger defense contractor. After all, both the company and its CEO may now be well-positioned for the next deal.

With the pending disposal of BCD now announced, Harris Corp is now a pure-play “mid-tier” defense contractor, and therefore more attractive as a potential partner to another defense firm; and Brown himself is well-suited for this environment.  He joined Harris from United Technologies (UTC), where he orchestrated a $16.5 billion deal to buy Goodrich Corp., which closed after he joined Harris as CEO.  Previously, as the head of UTC’s Fire & Security division, he executed more than 40 M&A deals, creating a $6.5 Billion operation in the process.

 

 

 

 

 

Related Content:

 

Press Release: Harris Corporation to Sell Broadcast Communications to The Gores Group for $225 Million

Harris Corp Announces Q1 FY 2013 Results, Further Writes Down Value of Broadcast Business

Harris Corporation To Divest Broadcast Business

Analyzing the Sale of the Harris Broadcast Division

Guest Post: Investment Banker Perspective on Sale of Harris Broadcast

Statement From Harris Broadcast CEO on Divestiture of Harris Broadcast Communications Division

Harris Q3 FY 2012 10-Q Filing – details write-down of broadcast division

Harris 8-K Filing – Restates Fiscal 2011-12 Revenue on Pro Forma Basis (Without Broadcast and Cyber Integrated Solutions)

TVNewsCheck Article: Tech’s Big Question: What’s Next For Harris?

Quincy Herald-Whig ArticleProspective buyers seek information on Harris broadcast; business as usual in Quincy

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Harris Corp Announces Q1 FY 2013 Results, Further Writes Down Value of Broadcast Business

Broadcast technology vendor financials, Broadcast Vendor M&A, Quarterly Results, SEC Filings | Posted by Joe Zaller
Oct 30 2012

Harris Corporation announced that its revenue in the first quarter of its 2013 fiscal year was $1.26Bn, down 6% versus the same period a year ago, and down 13% versus the previous quarter.

These results do not include the company’s Broadcast Communications Division (BCD) which was classified as a discontinued operation following the May 2012 announcement that Harris will divest its broadcast division, which is no longer considered a core asset to the defense contractor’s overall business. Harris Cyber Integrated Solutions (CIS), which the company said it was shutting down in February 2012 was also excluded from these results.

 

Performance of Broadcast Business Below Expectations

Although the company did not break out the results of its broadcast division, the performance of BCD in the quarter was “little bit worse than expected,” according to statements made by Harris CEO William Brown during a conference call with equity analysts.   “Our first quarter results in Broadcast were a little less than what we had expected, both because the market’s a little bit tough and because some of the issues around our selling the business [caused] some of our customers to be a bit hesitant,” said Brown.

Based on an analysis of recent Harris Corp SEC filings, it is believed that Harris BCD had revenues of approximately $135m during the first quarter of fiscal 2012, and more than $500m for the full 2012 fiscal year.

 

Update on Sale of Harris Broadcast Communications Division

Harris CFO Gary McArthur said the company is making progress on the disposal of BCD and it expects “to conclude by the end of the calendar year.”  This timetable is consistent with the company’s previous earnings call, and also with statements made by Harris BCD president Harris Morris at the company’s press conference at the recent IBC trade show.

McArthur also reiterated the company’s previously stated intention to “use up to $200m of the proceeds from the BCD disposition to repurchase additional shares” of Harris Corp.

 

Further Write-Down of Harris Broadcast Communications Division Valuation

Harris also announced that it has recorded additional non-cash impairment charges in discontinued operations totaling $222 million, the “vast majority” of which is related to BCD, with only about $6m attributed to CIS.

The company said it lowered the internal valuation of CIS and BCD based on “recent indicators of value during the first quarter of fiscal 2013, including market, financial performance and indications of value from interested parties.”

Brown said that as a result of these factors, Harris has puts a net book value of $287m on the company’s broadcast communications business, which he said gives an “indication of the value we expect to receive” from the sale of Harris BCD.

This is the third time in the last six months that Harris has taken a non-cash impairment charge against the value of BCD.

In May 2012 when Harris Corp announced its intention to divest BCD, the company said it “recorded in the third quarter a non-cash charge of $407m after-tax, or $3.62 per diluted share, to write down a significant portion of the goodwill and other long-lived assets in Broadcast Communications, resulting in the GAAP loss from continuing operations.”  Information about how Harris Corp calculated this write-down was published in the company’s Q3 FY 2012 10-Q filing.

Harris subsequently disclosed a second BCD impairment charge of $23.6m in August 2012 as part of the company’s annual 10-K filing with the SEC, which said:

 “Due to the length of time necessary to measure the impairment of goodwill and other long-lived assets, our impairment analysis [of BCD] was not complete as of the end of the third quarter of fiscal 2012. In the fourth quarter of fiscal 2012, we completed our impairment analysis and, as a result, recorded a $23.6 million ($10.5 million after-tax) increase to our initial estimated impairment charge. The portion of the total $447.6 million impairment charge related to goodwill was $395.6 million, a minor amount of which was deductible for tax purposes.”

 

The lowered valuation of BCD prompted JP Morgan Chase analyst Joseph Nadol to ask whether there is a price at which Harris would not sell the broadcast business.  Brown rebuffed this idea, saying “we made the decision to divest the Broadcast business because we didn’t think it fits strategically with where we want to take the [core] business. It’s now our job to maximize value for share owners and as we dispose of that business and that exactly what we’re doing. I don’t think it’s appropriate to have a where’s the sort of the walk-away price. We’re committed to sell the business and do the right thing for share owners, given the fact it doesn’t fit strategically and that’s what the management team has got a bead on right now. So we’ll tell more, we’ll have more of an update towards the end of the year as we announce the sale of Broadcast and clearly more to say as we announce our Q2 results.”

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Related Content:

Press Release: Harris Corporation Reports Fiscal 2013 First Quarter Results

Harris Corp. Fiscal 2013 First Quarter Earnings Call Presentation

Harris shares fall after Lazard downgrade http://dcft.co/Ra6J5m

Previous Quarter: Harris Announces Q4 and Full Year 2012 Results – Says Sale of Broadcast Business is On Track to Close by End of Year

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

Harris 10-K Filing with SEC for FY 2012

Presentation: Harris Annual Meeting of Shareholders, October 26, 2012

Guest Post: Investment Banker Perspective on Sale of Harris Broadcast

Analyzing the Sale of the Harris Broadcast Division

Statement From Harris Broadcast CEO on Divestiture of Harris Broadcast Communications Division

Harris Corporation To Divest Broadcast Business

Harris Q3 FY 2012 10-Q Filing – details write-down of broadcast division

Harris 8-K Filing – Restates Fiscal 2011-12 Revenue on Pro Forma Basis (Without Broadcast and Cyber Integrated Solutions)

TVNewsCheck Article: Tech’s Big Question: What’s Next For Harris?

Quincy Herald-Whig ArticleProspective buyers seek information on Harris broadcast; business as usual in Quincy

Harris Corporation Shuts Down Cyber Integrated Solutions Business

 

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More Broadcast Vendor M&A: Screen Service Targeted in €30.5m Takeover Bid

Broadcast technology vendor financials, Broadcast Vendor M&A | Posted by Joe Zaller
Oct 22 2012

Italian broadcast transmitter vendor Screen Service became the target of a €30.5m takeover bid launched by Monte Bianco, according to a filing with the Milan Stock Exchange.

The bid values Screen Service, which for the first half of its financial year posted a loss of €3.67 on revenue of €25.1m, at a 35% premium over its previous stock price.

Monte Bianco, which is backed by French PE firm HLD, said it had not previously discussed the proposed deal with any of the shareholders of Screen Service, including Opera who own about 30% of the company.

Monte Bianco, who currently has an holds about 1.2% of Screen Service’s shares, said the proposed deal will increase the competitiveness of Screen Service, and ensure its medium and long term growth.

Screen Service is based in Brescia, Italy also has operations in the US and Brazil.  In July 2012, the company paid €1.1m to up its stake in its Brazilian subsidiary to 75% from 60%.

This is the second PE-backed deal for a broadcast transmitter in the last two years.  In April 2011, Technicolor announced that it had sold the Grass Valley transmission business to PARTER Capital Group for a “non-material” amount.  At that time Technicolor said that the Grass Valley transmission business has 291 employees and posted a loss in 2009 of revenues of approximately €43m.

The Harris broadcast communications division (BCD), which supplies broadcast transmitters along with a wide variety of other products, is currently being divested by its parent company, Harris Corporation.  It is believed that Harris BCD posted revenue of approximately $500m in its last fiscal year, but transmitter revenues were not broken out.

Although many in the broadcast industry may perceive transmitter as “old technology,” Harris BCD president Harris Morris said at the IBC 2012 exhibition that the company’s transmitter business are the “tip of the spear” into high growth emerging markets.  According to Morris, when countries in emerging markets make the transition to digital broadcasting one of the first things they buy is a transmitter, so  Harris BCD is able to sell through its additional elements of its product line on the back of these deals.

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Related Content:

Reuters Article: French group launches bid for Italy’s Screen Service

More Broadcast Vendor M&A: Technicolor Closes Deal to Dispose of Grass Valley Transmission Business

Analyzing the Sale of the Harris Broadcast Division

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© Devoncroft Partners. All Rights Reserved.

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Harris Announces Q4 and Full Year 2012 Results – Says Sale of Broadcast Business is On Track to Close by End of Year

Broadcast technology vendor financials, Broadcast Vendor M&A | Posted by Joe Zaller
Aug 02 2012

Harris Corporation announced that its revenue for the fourth quarter of its fiscal 2012 was $1.44 billion compared with $1.52 billion in the prior-year quarter.

Revenue from the company’s broadcast division (BCD), which is now classified as a discontinued operation, was not disclosed. 

Harris Corporation announced its intention to divest its broadcast division in May 2012, saying that BCD was no longer considered a core asset to the defense contractor’s overall business.  An analysis of the sale of the Harris broadcast business showed that the company has approximately 1,700 employees and had revenue of approximately $375m through the third quarter of FY 2012, essentially flat with the previous year.

The only mention of the ongoing sale process sale of Harris Broadcast was on the company’s earnings conference call, when Harris CEO William Brown said the following in response to a question from JP Morgan Chase analyst Joseph Nadol “We’ve just initiated the process. We’re out in the marketplace with offering materials. The response so far has been very, very good. We expect bids in the next few weeks and we’ll expect to conclude a transaction by the end of the year as — end of the calendar year, as we’ve said last time, and we’re on track for that.”

It is believed that Harris has retained Morgan Stanley to assist with the sale of the company’s broadcast division, and that the company is holding preliminary discussions with a variety of interested parties.

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Related Content:

Press Release: Harris Corporation Reports Solid Fiscal 2012 Fourth Quarter Results

Harris Fiscal Q4 2012 Analyst Presentation

Harris Fiscal Q4 2012 Conference Call Transcript

Guest Post: Investment Banker Perspective on Sale of Harris Broadcast

Analyzing the Sale of the Harris Broadcast Division

Statement From Harris Broadcast CEO on Divestiture of Harris Broadcast Communications Division

Harris Corporation To Divest Broadcast Business

Harris Q3 FY 2012 10-Q Filing – details write-down of broadcast division

Harris 8-K Filing – Restates Fiscal 2011-12 Revenue on Pro Forma Basis (Without Broadcast and Cyber Integrated Solutions)

TVNewsCheck Article: Tech’s Big Question: What’s Next For Harris?

Quincy Herald-Whig ArticleProspective buyers seek information on Harris broadcast; business as usual in Quincy

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