Posts Tagged ‘Howard Lance’

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

.

© Devoncroft Partners. All Rights Reserved.

.

Analyzing the Sale of the Harris Broadcast Division

Broadcast technology vendor financials, Broadcast Vendor M&A | Posted by Joe Zaller
May 07 2012

After last week’s announcement that Harris Corporation plans to sell its broadcast business, I was contacted by a number of people who wanted more information about Harris Broadcast and the transaction.  Here’s a list of the top questions, along with some thoughts on each one

 

How Big is Harris Broadcast in Terms of Employees and Revenue?

Employees: According to this article in the Quincy Herald-Whig, the Harris Broadcast Communications Division (BCD), has 1,700 employees, including 348 employees at its Quincy Illinois facility.

Revenue: The revenue of Harris Broadcast is somewhat difficult to calculate because Harris BCD is part of Harris Corporation’s Integrated Network Solutions (INS) business unit, which was created last year when Harris Corporation strategically realigned its business segments

Until last week, the last time Harris published data about the broadcast business was more than a year ago (Q2 Fiscal 2011).  However, on the company’s recent Q3 2012 analyst conference call, Harris CFO Gary McArthur disclosed that Harris Broadcast had revenue for the third quarter of fiscal 2012 was $111m, a decline of 14% versus the same period a year ago – thereby also implying that revenue in Fiscal Q3 2011 was $126.5m (interestingly this is a different number than Harris provided last year when it said that Broadcast revenue in Q3 2011 had increased 9% versus Q3 2010, implying Q3 Fiscal 2011 revenue of $134m, but for the purposes of this article, I will stick with the implied $126.5m revenue figure for Q3 2011). Fiscal 2011 Q4 can be calculated from previous earnings announcements.

Also on the Q3 FY 2012 earnings call, Harris revised its guidance for FY 2012.  The company had previously said its revenue for Fiscal 2012 would be approximately $6 Billion. In its Q3 2012 analyst presentation (last page), Harris now says that its FY 2012 revenue excluding Broadcast and Cyber Integrated Solutions (Cyber) operations, (which was also part of the INS Division and was shut down in February 2012) will be $5.45 Billion.  This implies that the company was projecting approximately $555m in revenue from the combination of its broadcast and cyber businesses in 2012.

Harris also recently filed an 8-K with the SEC that enables one to derive more information about the broadcast business.  The 8-K filing restated the performance of Harris’s INS division on a pro-forma basis (excluding Broadcast and Cyber).  By subtracting the pro-forma numbers from previously issued results, it’s possible to approximate the revenue of Harris Broadcast in both 2011 and 2012.

Other regulatory filings show that the revenue from the Harris Cyber business was $11.7m for the first nine months of the current fiscal year.   Thus the revenue of the broadcast business can be calculated as shown below. 

 

 

 

The table above shows that in Fiscal 2011 the Harris broadcast business generated approximately $545m in revenue.  What’s interesting is the company’s huge Q4 2011 performance, which was up 31% over the same period in 2010.

It appears that for the first three quarter of the company’s fiscal 2012, Harris Broadcast revenue is approximately $375m, roughly flat with the first nine months of fiscal 2011.  This begs the question as to whether Harris Broadcast will be able to achieve Q4 FY 2012 results that are strong as their performance a year ago.

According to the article reference earlier, a Harris Broadcast spokesperson said that 56% of the division’s revenue comes from North America.

 

 

What is Harris Broadcast’s Profitability and what is the Impact of Corporate Overhead on Profit?

Given the opaque nature of the broadcast division’s financials, it’s difficult to know its profit levels. The company said that broadcast made a profit in fiscal 2011, but did not offer details.

However, it’s important to keep in mind that Harris Broadcast is part of a $6 Billion defense contractor. As such it undoubtedly has significant corporate overheads allocated to it by the parent company.  While this number is unknown, it likely runs into the millions of dollars.  If these costs are substantial, then they could impact the profitability of the division.  Under a new owner, it’s possible that Harris Broadcast will not be charged these overheads, thereby substantially increasing its underlying profitability. 

 

 

How Much Did Harris Spend The Broadcast Business Together?

For many years, Harris has been a leading provider of radio and television transmitters.  However in 2000 the company went on a buying spree that the company began to transform itself into a multi-product industry giant starting in 2000 with the acquisition of Lout Automation. According to an article in TVNewsCheck, Harris spent $942m on M&A since 2000:

  • Louth Automation in 2000, $85m
  • Encoda Systems in 2004 for $340m
  • Leitch Technologies in 2005 for $450m
  • Aastra Digital Video in 2006 for $35m
  • OSI in 2006 for $32m

 

 

Who Will Buy Harris Broadcast?

This is the number one question people are asking, and I don’t have a clue what the answer will be. 

Harris Broadcast is of a size (see above) that makes it one of the largest pure play broadcast technology vendors.  As such there are not many industry vendors large enough to be able to afford the Harris Broadcast business.  This leave several options including a “strategic” sale to a large IT or media vendor, a private equity deal which leaves the current management in place, or the spinning off of the broadcast business as a separate public company. 

If I had to bet, I would say that the PE option is the most likely, particularly if it is a cash deal.  Harris CEO William Brown implied his preference for a cash deal when he said that Harris will use the first $200m of the proceeds from the sale of the broadcast business to buy back stock, and use the residual balance to fund core activities.

Incidentally, Harris Corporation bought back approximately $800m in stock last year.

 

 

Will Harris Broadcast Be Sold as a Unit or Piecemeal?

It would be pure speculation on my part to hazard a guess at this one, but I’d be remiss if this question was not included on this list.  I am sure Harris is evaluating all the options.

 

 

How Much Will Harris Broadcast Sell For?

This depends on a huge number of factors, and I will defer to others to answer this one.

On the one hand it’s possible that Harris Broadcast sells for a healthy multiple as per the Cisco/NDS and Harmonic/Omneon deals.  On the other hand the valuation may be much lower as per the Francisco Partners / Grass Valley deal. 

One key factor is the expectation of valuation that Harris Corporation has for the broadcast business and how quickly it wants to do a deal.  Although this is not known, the company has provided a few clues in both its statements to analysts, and its regulatory filings.

As stated above on the company’s recent earnings call, Brown said he expects a transaction to occur by the end of calendar 2012.  He went on to say that the first $200m from the sale of the broadcast business would be used to buy back Harris stock.  However, he went on to say that he “fully expects that the proceeds [from the sale of the broadcast business] will be substantially higher than $200m”, although he declined to speculate on a valuation or even a value range.

The company also 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.

In its Q3 FY 2012 10-Q filing with the SEC, Harris Corporation provided useful information about how it calculated the $407m charge, and how it is internally valuing the broadcast business.

The following information is excerpted from the 10-Q:

“Goodwill and other long-lived assets held and used related to Broadcast Communications with a carrying amount of $800.0 million were written down to their preliminary estimate of fair value of $376.0 million, resulting in a preliminary estimate of $424.0 million for a non-cash impairment charge, which was included in income (loss) from continuing operations for the quarter and three quarters ended March 30, 2012. See Note N — Impairment of Goodwill and Other Long-Lived Assets in these Notes for additional information.

 

“Note N — Impairment of Goodwill and Other Long-Lived Assets

“We test our goodwill and other indefinite-lived intangible assets for impairment annually, or under certain circumstances, more frequently, such as when events or circumstances indicate there may be impairment. Indications of potential impairment of goodwill related to Broadcast Communications (which is part of our Integrated Network Solutions segment) were present at the end of the third quarter of fiscal 2012 resulting from the following circumstances and other factors: (i) an unanticipated revenue decline and operating loss for Broadcast Communications for the third quarter of fiscal 2012 (as a result of weaker demand in North America and longer international sales lead times), which also resulted in a decrease in the fiscal 2012 outlook for Broadcast Communications and (ii) depressed indicators of value resulting from analyses undertaken in the third quarter of fiscal 2012 in connection with the review of our business portfolio, including the evaluation of strategic alternatives for Broadcast Communications that included a potential divestiture of Broadcast Communications and the principal markets currently available. Consequently, in connection with the preparation and review of our financial statements for the third quarter of fiscal 2012, we performed an interim review of Broadcast Communications’ goodwill for impairment as of the end of the third quarter of fiscal 2012. See Note R — Subsequent Event in these Notes for details regarding the approval by our Board of Directors on April 27, 2012 of a plan to divest Broadcast Communications.

“To test for potential impairment of goodwill related to Broadcast Communications, we prepared a preliminary estimate of the fair value of the reporting unit based on a combination of projected discounted cash flows and principal market-based multiples applied to sales and earnings. The current carrying value of the Broadcast Communications reporting unit exceeded its estimated fair value, and accordingly, we preliminarily allocated the estimated fair value to the assets and liabilities of the Broadcast Communications reporting unit to estimate the implied fair value of goodwill.

“In conjunction with the above-described impairment review, we also conducted a review for impairment of other long-lived assets related to Broadcast Communications, including amortizable intangible assets, fixed assets and capitalized software, and impairment of these assets was considered prior to the conclusion of the goodwill impairment review. The estimated fair value of other long-lived assets related to Broadcast Communications was determined based, in part, on an analysis of projected cash flows.

“As a result of these impairment reviews, we concluded that goodwill and other long-lived assets related to Broadcast Communications were impaired as of the end of the third quarter of fiscal 2012 and we recorded an estimated non-cash impairment charge of $424.0 million ($406.5 million after-tax). Due to the length of time necessary to measure the impairment of goodwill and other long-lived assets, our impairment analysis is not complete and is subject to change. We expect to complete our analysis prior to reporting our financial results for the fourth quarter of fiscal 2012 and will record any adjustments to our preliminary estimate at that time. The portion of the estimated impairment charge related to goodwill was $379.0 million and is not deductible for tax purposes. The tax effect of that non-deductibility was treated as a discrete item in the third quarter of fiscal 2012 for purposes of calculating our effective tax rate. We do not expect to make any current or future cash expenditures as a result of the impairment. The estimated impairment does not impact covenant compliance under our credit arrangements, and we do not expect the impairment to impact our ongoing financial performance, although no assurance can be given.”

 

 

Timing – Why Now?

On the company’s conference call with equity analysts, Brown was asked why the broadcast business is being sold now.  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.”

One reason could be Brown himself, who became president & CEO of Harris Corporation in late 2011.   

The current broadcast business was put together under the watch of former CEO Howard Lance who retired last year.  Lance was supportive of the broadcast business so while he was at the helm of Harris Corporation, the structure was unlikely to change.

Brown joined Harris from United Technologies where he was responsible for the company’s global strategic planning and M&A activity.  He’s a deal-maker who has not wasted any time divesting of “non-core” assets, starting with the Cyber Integrated Solutions business, and now broadcast. 

Now that Brown has set up Harris to be more focused on its core defense business, one has to wonder whether he will continue to run the Harris as a defense company, or try to engineer a larger deal that would see Harris Corporation itself sold to a larger defense contractor.

 

 

What Happens to FAME and DooH Initiatives?

Harris Broadcast has for many years sought to leverage its expertise video processing, management, manipulation and storage into market verticals outside of broadcast.  The two most prominent examples of this are the work it does with the military, and its efforts in Digital Signage or “Digital out of Home” (DooH).

For military markets, Harris has long touted its FAME (Full-Motion Video Asset Management Engine) initiative, which seeks to use broadcast technology to capture, manage, analyze and store the vast amounts of video-based content that are now being created in military operations.  Harris has never revealed the extent to which this initiative has gained traction with customers.  However it seems logical that if Harris Broadcast is spun off, the contacts (and contracts) that Harris Corporation have with government customers will live on.  On the other hand it’s also possible that a more focused owner may devote fewer resources to this area in favor of initiatives that are more core to the broadcast industry.

Harris has also very active in the digital signage business, and has had good success with clients including 7-Eleven, Harrods, McDonalds, the Orlando Magic, and Madison Square Garden. Some of these  contracts (especially in the sports market) have undoubtedly resulted in the sale of a lot of Harris Broadcast gear including signal processing and storage products.  The retail-focused projects are more about the digital signage solution than the sell through of broadcast technology.  Thus the issue for DooH markets is similar to the Harris FAME initiative – the contracts will live on, but it’s possible that a new owner may shift resources away from these areas in favor of a more focused approach to the broadcast market.

 

 

Branding — What Happens to the Harris Name?

Harris is one of the biggest names in the broadcast industry, but if its broadcast division is sold off to a PE firm, or is somehow spun out as a separate company, it may have only limited rights to the Harris name.  So depending on the outcome of the sale process, branding could become a major issue for the firm.

So how strong is the Harris brand? As part of our annual Big Broadcast Survey (BBS) study of the broadcast market, we have measured the brand values of Harris Broadcast for the past four years, so we are in a good position to know. 

The 2012 BBS uses a broad variety of metrics to benchmarks how buyers of broadcast technology perceive the strengths and weaknesses of more than 100 broadcast technology brands.  The Harris Broadcast brand is regarded very highly throughout the broadcast industry, and appears to have increased in several key areas over the past twelve months. 

For evidence of the its standing in the market, one only has to look at various broadcast industry message boards to see the outpouring of affection for the Harris broadcast brand. 

 

So what are your thoughts?  There are certain to be many more questions about this deal.  It will be very interesting to watch.

.

.

Related Content:

Harris Corporation To Divest Broadcast Business

Press Release: Harris Corporation Reports Fiscal 2012 Third Quarter Results

Harris Q3 FY 2012 10-Q Filing

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

Press Release: Harris Corporation Reports Fiscal 2012 Third Quarter Results

Harris Fiscal Q3 2012 Analyst Presentation

Harris Fiscal Q3 2012 Conference Call Transcript

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

Quincy Herald-Whig Article: Prospective buyers seek information on Harris broadcast; business as usual in Quincy

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

Harris Corporation Shuts Down Cyber Integrated Solutions Business

Harris Corporation Strategically Realigns Business Segments; Broadcast Communications Rolled into New “Integrated Network Solutions” Unit

Harris Corporation Names New President and CEO

.

© Devoncroft Partners. All Rights Reserved.

.

 

Harris Corporation To Divest Broadcast Business

Broadcast technology vendor financials | Posted by Joe Zaller
May 01 2012

After much rumor and industry speculation, Harris Corporation announced today that it will sell the company’s broadcast communications division.

The announcement was made in conjunction with the release of the company’s results for the first quarter of 2012, and just a few months after the company said it would shut down its cyber integrated solutions business.  Both Harris broadcast and Harris cyber integrated solutions were part the company’s Integrated Network Solutions (INS) unit, which was created last year when Harris strategically realigned its business segments

“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 new Harris Corp CEO William Brown. “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.”

“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.

“Although broadcast is no longer core to our company, we believe the business has the potential for strong growth and margin expansion, is led by a solid leadership team, and has long term value for someone who brings a focused approach to the broadcast and media market.”

The company telegraphed its intentions last quarter when said that despite improving performance in the broadcast division there was still 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.”

In connection with the process of evaluating strategic alternatives for Broadcast Communications, the company 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. Following the close of the quarter, the company approved a plan to divest Broadcast Communications. As a result, current and prior period financial results for Broadcast Communications will be reported as discontinued operations beginning with the fourth quarter of fiscal 2012.

Brown said that Harris had only recently kicked off the sale process for its broadcast business, but that he expects a transaction to take place by the end of 2012. 

The company says it will use approximately $200m from the sale of the broadcast division to buy back its own stock. However, Brown made it clear that Harris “fully expects that the proceeds [from the sale of the broadcast business] will be substantially higher than $200m”, although he declined to speculate on a valuation or even a value range.

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.”

Other analysts appeared pleased with the announcement.  For example, Lazzard Capital Markets analyst Michael Lewis, said on the conference call “I have to applaud you on this broadcast divestiture, it just never made sense to me.”

 

Performance of Harris Broadcast

Because Harris broadcast is now part of the company’s INS division, it had been difficult to know its precise financial performance.  The last time full financials for Harris broadcast were available was at the end of the company’s 2011 fiscal year (released in August 2011), when the Harris broadcast communications division had revenue of $553.8m, an increase of 14% versus its performance in fiscal 2010.  At that time, then Harris CEO Howard Lance, the broadcast division in fiscal 2011 had shown “excellent growth” and has “vastly improved” over last year.  It was “profitable both for the quarter and for the fiscal year in total.”

Today the company disclosed that its revenue for the third quarter of fiscal 2011 was $111m, a decline of 14% versus the same period a year ago.  Harris CFO Gary McArthur said that the company’s broadcast business experienced weaker demand in North America and longer international sales lead time, which led to a decline in revenue and “resulted in a non-GAAP operating loss of $4m compared to operating income in the prior year of $2m.”

By looking at the company’s revised financial guidance, it is possible to estimate the revenues of the broadcast business.  Harris had previously said that its total revenue for the full fiscal year 2012 would be ~$6 Billion.  Today it said that it expects to see revenue of $5.42 Billion, excluding the broadcast and cyber solutions businesses. This implies that the combined broadcast and cyber businesses are expected to have combined revenues of approximately $555m for the full fiscal year 2012. However the size of the cyber business has not been disclosed.

.

Related Content:

Press Release: Harris Corporation Reports Fiscal 2012 Third Quarter Results

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

Harris Fiscal Q3 2012 Analyst Presentation

Harris Fiscal Q3 2012 Conference Call Transcript

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

Harris Corporation Shuts Down Cyber Integrated Solutions Business

Harris Corporation Strategically Realigns Business Segments; Broadcast Communications Rolled into New “Integrated Network Solutions” Unit

Harris Corporation Names New President and CEO

 

© Devoncroft Partners. All Rights Reserved.

.

Harris Reports Q1 2012 Results, Says Broadcast Revenue Increasing

Broadcast technology vendor financials | Posted by Joe Zaller
Oct 27 2011

Harris Corporation reported results for the first quarter of its 2012 fiscal year.

The company’s broadcast division is now part its Integrated Network Solutions (INS) unit, which was created when Harris strategically realigned its business segments in March of 2011, so the company no longer breaks out the specifics of its broadcast business.

Thus the information provided by the company about the broadcast business was scant compared to past earnings announcements.

Here’s what they did say:

Harris Corp. chairman and CEO Howard Lance said that the broadcast division it continues to see revenue growth in international regions: the South America, Middle East and Asia. In the company’s earnings presentation Harris said that broadcast was continuing to benefit from international demand.

Significant broadcast orders during the quarter, included $3 million from TV Azteca for the first live 3D transmissions throughout Mexico.

Harris also said it received a $3 million order from Svyaz Engineering, the company’s Russian manufacturing partner, with which it will begin local production of digital television transmitters. According to Harris, Russia is currently in the initial stages of its transition from analog to digital, and will this will ultimately include the replacement of 22,000 transmitters across the country. The Russian digital transition will take place over the next several years, and Harris believes it is well positioned to participate significantly in this revenue opportunity.

.

Broadcast Business Impacted by Flooding in Thailand

On the conference call with equity analysts, Lance said the company “recently learned that one of our contract manufacturers located in Thailand has been impacted by the recent flooding. It’s really too soon for us to understand the extent of the impact and what impact it might have on the second quarter results in broadcast. We’re working feverishly to mitigate any impact. All of our finished goods have been moved out of Thailand, and our suppliers in the process of moving production and starting it at an alternate location.”

.

.

Related Content:

Press Release: Harris Corporation Reports Fiscal 2012 First Quarter Results and Significantly Higher Orders

Harris Corporation Q1 FY 2012 Conference Call Transcript

Harris Corporation Q1 FY 2012 Earnings Call Presentation

Harris Corporation Strategically Realigns Business Segments; Broadcast Communications Rolled into New “Integrated Network Solutions” Unit

Previous Quarter: Harris Broadcast Division Posts Strong Growth in Q4 2011, Returns to Profitability for Quarter and Full Year

Previous Year: Harris Broadcast Division Reports $9m Loss on Rising Orders for First Quarter of 2011 Fiscal Year

.

.

 

Harris Corporation Names New President and CEO

Uncategorized | Posted by Joe Zaller
Oct 10 2011

Harris Corporation has appointed William Brown president and chief executive officer effective November 1, 2011. Brown succeeds current CEO Howard Lance, who announced in May 2011 his intention to retire when a successor was named. Lance will continue to serve as chairman, president and CEO through October 31, 2011, and will then serve as non-executive chairman of the Board until December 31, 2011.

Brown joins Harris from United Technologies Corporation where he held several senior leadership roles since he joined the company in 1997. During the past six months, as Senior Vice President, Corporate Strategy and Development, he has been responsible for the company’s global strategic planning and M&A activity.

“I am excited to join Harris at such an important time in the company’s history,” said Brown. “During the past decade Harris has transitioned into a diversified provider of ultra-reliable communications and information technologies to government agencies and commercial markets worldwide. With its strong financial position, robust pipeline of potential opportunities and well-defined areas for new market entry, the company is ideally positioned for further growth. I look forward to working with the company’s talented management team to build on the success it has achieved.”

Brown received bachelor of science and master of science degrees in mechanical engineering from Villanova University and a master of business administration degree from the University of Pennsylvania Wharton School.

 

Harris Broadcast Division Posts Strong Growth in Q4 2011, Returns to Profitability for Quarter and Full Year

broadcast technology market research, Broadcast technology vendor financials, Quarterly Results | Posted by Joe Zaller
Aug 03 2011

Harris Corporation announced it Q4 and full year FY2011 results.

The company’s broadcast division is now part its Integrated  Network Solutions (INS) unit, which was created when Harris strategically realigned its business segments in March of 2011, so Harris no longer breaks out the specifics of its broadcast business.

However, the company did provide detail of some of its results, and according to Harris Corp. chairman and CEO Howard Lance the company’s broadcast business posted a “solid profit” for the 4th quarter of the company’s 2011 fiscal year.

Q4 revenue was $167.7m, an increase of 31% versus the same period a year ago (when it posted a loss of $21m), and an increase of 25% versus the previous quarter (when it turned a profit).  Lance attributed the strong performance to improved broadcast sales in international markets as well as growth in the new media market, including digital-out-of-home (DooH).

Broadcast communications orders for the 4th quarter were $152.1m up 37% versus the same period a year ago.  Significant deals closed in the quarter included a $16m contract from Turkmenistan TV for a full range of broadcast solutions from Harris.  The company also said that it was experiencing order growth in Latin America and Asia.

On the company’s conference call with equity analysts, Lance highlighted some of the company’s recent success in the DooH market.  During the fourth quarter, Harris installed its first digital signage system in the UK, at luxury retailer Harrods.  In the US, Harris is collaborating with Digital Display Networks and ABC to create what it says is one of the largest DooH advertising networks in the world, 7-Eleven TV.  Lance said that the system is already installed in more than 3,000 7-Eleven stores.

 

Full Year Results Exceed Guidance:

For the full fiscal year, Harris broadcast communications division had revenue of $553.8m, an increase of 14% versus its performance in fiscal 2010.  These results exceeded guidance that the company had issued for the division when it said it expected the broadcast division to break-even on full year revenue in region of $520m – $540m.

According to Lance, the broadcast division has shown “excellent growth” and has “vastly improved” over last year.  It was “profitable both for the quarter and for the fiscal year in total.”

 

 

Related Content:

Press Release: Harris Corporation Reports Solid Fiscal 2011 Fourth Quarter Results

Harris Corporation Q4 and Full Year FY 2011 Conference Call Transcript

Harris Corporation Q4 and Full Year FY 2011 Earnings Call Presentation

Harris Broadcast Communications Profitable in Q3 as Revenue Increases Nine Percent

Harris Says Broadcast Communications Business Improved Significantly in Q2

Harris Corporation Strategically Realigns Business Segments; Broadcast Communications Rolled into New “Integrated Network Solutions” Unit

Harris Broadcast Business Making a Comeback Thanks to Improved Market Condition and New Opportunities in Digital-Out-of-Home

.

.

 

Harris Broadcast Communications Profitable in Q3 as Revenue Increases Nine Percent

broadcast industry technology trends, Broadcast technology vendor financials, Quarterly Results | Posted by Joe Zaller
May 03 2011

Harris Corporation announced its results for the third quarter of its fiscal year.

On an overall basis, the company’s revenue was $1.41Bn, an increase of 6% versus the same period a year ago.  However the company’s profit fell by almost 16%.

Harris Corporation’s full results are covered elsewhere.  This post looks specifically at the results of the company’s broadcast communications business.

This is the first quarter since Harris strategically realigned its business segments, and rolled the broadcast communications business into a newly created “Integrated Network Solutions” (ISN) business unit.

Now that Harris broadcast communications business is part of ISN, its performance in the sector is somewhat more opaque than in the past, with only top level numbers disclosed by the company.

Broadcast Communications revenue was $134.1m, an increase of 9% versus the same period a year ago, (when the company posted an operating loss of $5m on revenue of $123m), and an increase of 3% versus the previous quarter.

On the company’s conference call with equity analysts, Harris Corporation CEO Howard Lance called the performance of the broadcast business a “significant year-over-year improvement.” Lance went on to say that the Harris broadcast business turned a profit during the quarter and was still on track to achieve break even performance for the full year.

In guidance issued last quarter, Lance said that the Harris expects its broadcast division to break-even on full year revenue in region of $520m – $540m, a 7-11% revenue increase versus the actual results during the previous fiscal year.

Harris broadcast received several major orders during the quarter, including a $9m contract from a central-Asian broadcaster, and a digital-out-of-home / IPTV deal with Madison Square Garden in New York that will commence this summer and be completed in time for the 2013-13 season. The company also received orders during the quarter from Gray Television, Cox Broadcasting and CBS.

The Harris broadcast business accounted for 29% of the ISN division’s $463m revenue. The ISN business unit’s revenue increased 23% year-over-year, however most of this growth came via acquisition.  On an organic basis, ISN revenue was flat year-over-year.
.

.

Related Content:

Harris Press Release: Harris Corporation Reports Fiscal 2011 Third Quarter Results

Transcript of Harris Q3 conference call with equity analysts

Harris Says Broadcast Communications Business Improved Significantly in Q2

Harris Corporation Strategically Realigns Business Segments; Broadcast Communications Rolled into
New “Integrated Network Solutions” Unit

Harris Broadcast Business Making a Comeback Thanks to Improved Market Condition and New Opportunities in Digital-Out-of-Home

Harris Q3 2010 Results for Broadcast Communications Division

.

.

 

Harris Says Broadcast Communications Business Improved Significantly in Q2

broadcast industry technology trends, broadcast industry trends, Broadcast technology vendor financials, Quarterly Results | Posted by Joe Zaller
Jan 26 2011

Harris Corporation today reported results for the second quarter of its fiscal year.  Overall, the company posted revenue of $1.44Bn.  This represents an organic revenue increase of 9% versus the previous year, and an increase of 18% when contributions from acquired companies are taken into consideration.

For the first time in many quarters, the company reported a strong improvement in its broadcast communications business. 

Revenue from the company’s broadcast communications division in Q2 was $130m an increase of 11% from the previous quarter, and an increase of 7% versus the same period a year ago. Orders in the quarter came in at $134m, down $139m in the previous quarter and $135m during the same period last year.

On an operating basis, the performance of the broadcast communications division does seem to be improving.  Although the company’s broadcast business posted an operating loss of $1m during the quarter, this result is significantly better than its operating loss of $9m during the previous quarter and an operating loss of $5m during the same period a year ago.

The company continues to restructure its operations, and took a $1m charge for these actions during the quarter.

For the first six months of the fiscal year revenue from the broadcast communications division was $251.6m, an increase of 7% versus the first half of last year.  The operating loss for the first half of the year was $9.4m, the vast majority of which was declared in the previous quarter.

During the company’s conference call with equity analysts, Harris president and CEO Howard Lance had positive things to say about the broadcast business. “Our broadcast business has improved and has the opportunity to contribute to earnings growth,” he said.  Lance also said that the broadcast business continued to show a number of encouraging signs including year-over-year revenue growth, a book-to-bill ratio of greater than 1:1 for the second consecutive quarter, and near break-even operating results.

.

Guidance for the Harris Broadcast Business:

Lance provided forward looking guidance for the broadcast business saying that the company expects the division to break-even on full year revenue in region of $520m – $540m.  This guidance represents a 7-11% revenue increase versus the actual results during the previous fiscal year. 

It’s interesting to note that this guidance is higher than announced last quarter when Lance said that he expected full year revenue for the broadcast business to be in the region of $490m – $510m, with break-even performance. 

Last quarter Lance also said that the company expects losses in the broadcast segment will continue during the first half of the fiscal year, but that improving profitability will follow during the second half of the fiscal year. 

Given the results released today, this certainly seems to be the case.

.

You can read the full Harris Q2 earnings press release here.

A transcript of the Harris Q2 conference call is here.

You can read information about the company’s previous quarterly results here.

.

.

Harris Broadcast Division Reports $9m Loss on Rising Orders for First Quarter of 2011 Fiscal Year

broadcast technology market research, Broadcast technology vendor financials, Quarterly Results | Posted by Joe Zaller
Oct 25 2010

Harris Corporation reported revenue for the first quarter of its 2011 fiscal year. On an overall basis, the company reported strong results including a 17% increase in revenue and a 56% increase in GAAP net income.

However the results of the company’s broadcast communications division were not as good.  Although the broadcast communications division of Harris reported growth in both orders and revenue, the company posted an operating loss of $9m for the quarter in the broadcast segment.

Broadcast revenue for the quarter was $122m, an increase of 3% versus the same period a year ago, but a decline of 5% versus the $128m revenue number posted last quarter.

Broadcast orders for the quarter were up sharply to $135m, an increase of 9% versus the same period last year, and an increase of 22% over the previous quarter. Significant orders in the quarter included $8 million from Nine Network Australia, $4m from TPBS in Thailand, $2.5m from Network 7 Australia, and $2.5m from Saudi TV.

The $9m operating loss in the quarter includes $1 million in charges related to cost-reduction actions.  The company said that it plans to take addition cost reductions action in its broadcast communications division, and expects total restructuring charges for the year to be about $5m.

The company issued a cautiously optimistic statement about its broadcast business says that despite the market weakness in the traditional U.S. broadcast market, the 1.1 book-to-bill ratio and year-over-year orders and revenue growth are encouraging signs.  The company also indicated that it has increased its investment in new media and international growth opportunities.

On the company’s earnings conference call, Harris CEO Howard Lance provided equity analysts with forward-looking guidance for the broadcast business.  Lance said that the company continues to expect its broadcast business to achieve break even on full year revenue of $490m-$510m.  Lance also said that the company expects that losses in the broadcast segment will continue during the first half of the fiscal year, but that improving profitability will follow during the second half of the fiscal year.

.

You can read the full Harris earnings press release here.

You can read the full transcript of the Harris earnings call here.

.

Devoncroft Digest – August 15, 2010 – Earnings Galore, Broadcast Industry M&A Continues

broadcast industry trends, broadcast technology market research, Broadcast technology vendor financials, Devoncroft Digest, market research | Posted by Joe Zaller
Aug 15 2010

The Devoncroft Digest is a semi-regular amalgamation of news items I’ve seen recently that I think might be interesting / important for readers and clients. 

Due to my travel schedule it’s been two weeks since the last digest post.  Here are a few of the things that have caught my eye during this time.

Earnings Season Continues

We are now in the heart of earnings season, and a large number of tech vendors, platform operators, service providers and broadcasters.  For the most part these results have been generally positive, with many companies saying that they are seeing the green shoots of recovery taking hold. 

.

.

 

Broadcast Technology Vendor Earnings

.

Vizrt Q2 Revenue Rises 17%, CEO Says Market is Improving

Broadcast graphics and asset management provider Vizrt announced its Q2 and 1H results. Revenue for the quarter was up 17% y/y, driven by strong growth in the Americas, which was up 48% y/y.

Gross margins for the quarter were 65%, well ahead of the 58% that the company achieved during the same period a year ago. Broadcast graphics accounted for 72% of the company’s total revenues in 1H 2010.  According to the company, Vizrt’s graphics business is up 33% y/y.

Full details here.

.

Chyron Q2 Losses Narrow as Revenue Jumps 20% 

Broadcast graphics provider Chyron announced its financial results for Q2 and 1H 2010.

Q2 revenue was $6.94m, up 20% versus Q2 2009.  Gross margins for the quarter were 70%, up slightly from the previous year.  Q2 product revenue was $5.4m, up 18% y/y.  Service revenue increased 29% y/y to $1.19m.  Service revenue accounted for 22% of the quarter’s total revenue. The company posted an operating loss for the quarter of $680,000, a 52% y/y improvement; and a net loss of $710,000, 35% better than a year ago.

Full Details Here

.

Miranda Q2 Revenue Up 3% y/y, +11% q/q. CEO Says Market Conditions Improving

Broadcast infrastructure provider Miranda Technologies announced their Q2 2010 results.  Revenue for the quarter was C$32.1m, up 3% from the same period a year ago and up 11% versus the previous quarter.  International sales were up 11% y/y.  Sales in the US were up 10% y/y

The company’s net income jumped 173% to C$3.5m as expenses were reduced during the quarter, and EBITDA rose by 125% to C$6m versus the same period in 2009.  Gross margins were 60%, slightly down from Q2 2009, but up from 57.7% in the previous quarter.  This is a good showing in a competitive market, which the company attributes to a higher margin mix, and increased sales of routing switchers.

Full Details Here

.

DivX Q2 Revenue Jumps 29%

DivX announced that its Q2 revenues were up 29% y/y and that its licensing business was up 23% y/y.  The company, which is in the process of being acquired by Sonic (who also announced their numbers recently) posted a GAAP Loss of $2.8m, and non-GAAP NI of $760K

Read the Divx earnings press release here 

.

DG FastChannel Reports Record Q2

Advertising and broadcast content delivery specialist DG FastChannel reported record results for its FY2010 second quarter, blowing past the expectations of equity analysts. 

Revenue for the quarter was $60.3m, well ahead of the $55.6m consensus estimate of equity analysts.  This represents a 38% revenue increase versus the same period a year ago, and an increase of 11% from the previous quarter.  Net income for the quarter was $9m, up 150% increase versus Q2 2009 and up 12.5% versus the previous quarter.

Significantly, the company’s revenue from the delivery of HD advertising content increased 99% to $23.9 million versus the same period of 2009.

The company also that it retired all of its outstanding debt, thanks to a recent public equity offering that raised net proceeds of approximately $108m. As a result of this offering, the company reported that as of June 30, 2010, it has $79.6 million in cash and no debt.

Company Chairman & CEO Scott Ginsburg said “The Company continues to execute on its strategic business plan… revenue, margins, earnings and net debt show marked improvements during the second quarter.”

.

Harris Broadcast Records $21m Operating Loss

Harris Corporation reported its Q4 and full year 2010 results.  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 CEO Howard 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.”

Full Details Here

.

RealD Reports 1st Results As Public Company

3D specialist RealD announced its first results as a public company, and reported huge y/y increases in revenue and EBITDA, which were up 152% and 387% respectively.  The company announced that it has now deployed 7500 screens, significantly more than Technicolor, who announced recently that they have now deployed 250 screens, 

Read the RealD earnings press release here.

,

,

Broadcaster & Platform Operator Earnings

DISH Network Reports Second Quarter 2010 Financial Results 

DISH Network reported total revenue of $3.17 billion for the quarter ended June 30, 2010, a 9.1 percent increase compared with $2.90 billion for the corresponding period in 2009.

DISH Network lost approximately 19,000 net subscribers during the quarter ended June 30, 2010, ending the quarter with approximately 14.318 million subscribers.

.

 

Ascent Media Reports Lower Revenue, Higher Losses

Digital media service provider Ascent Media reported increased losses and lower revenue for the second quarter ended of 2010.  The company attributes the lower results to market volatility and lower capital spending by customers. 

Revenue for the quarter dropped 13% to $99.5m, while revenue for the first six months was off 11% to $204m.  The company said that the decline in second quarter and year-to-date revenue was driven primarily by a reduction in revenue from the Content Services segment.

Q2 losses from continuing operations before income taxes were $17.5m, compared to a loss of $12.4 million in the prior year period. Year-to-date, the loss from continuing operations before income taxes was $28.6 million compared to a loss of $23.2 million for the six months ended June 30, 2009.

 “Ascent’s year-to-date operating results have not met our expectations as uncertainty about the timing and pace of the economic recovery has led to ongoing volatility in the media marketplace,” said William Fitzgerald, Ascent’s CEO. “A consequence of the current environment is that our customers have continued to take a cautious approach to capital spending.”

Fitzgerald was more upbeat about the rest of 2010, saying “We are beginning to see positive indications of an upturn, including first half revenue improvement in our creative services business, a strengthening pipeline of feature film and other projects, and rising industry advertising estimates for the second half of 2010.”

Ascent’s full earnings press release can be found here.

.

Scripps Reports Second-Quarter Results 

Scripps reported operating results for the second quarter of 2010 that showed a continuing trend of significantly improved year-over-year revenue performance in the television division – up 22 percent from last year.

You can read the Scripps earnings release here.

.

Liberty Media Reports Second Quarter 2010 Financial Results

The Liberty Media press release is here.

Liberty Media investor conference call transcript here.

.

DIRECTV Q2 Rev Up 12%, Net Income up 33% Buys Back Stock 

DTH satellite operator DirecTV announced that it grew revenues by 12% to $5.85Bn and Net Income 33% to $543 Million.

DirecTV Q2 Press Release Here

.

Cablevision Systems Corporation Reports Second Quarter 2010 Results 

Cablevision’s Q2 profits fell by 30% but its revenues were up 5.8% to $1.802 billion versus the same period a year ago, which the company says reflects solid revenue growth in Telecommunications Services and Rainbow, offset slightly by a decline at Newsday. Consolidated adjusted operating cash flow grew 9.0% to $677.6 million and consolidated operating income grew 23.0% to $416.8 million, both compared to the prior year period.

You can read the Cablevision press release here

.

WSJ.com – Net Rises at Time Warner Cable, Falls at Cablevision

According to a Wall Street Journal article, Time Warner’s second-quarter earnings rose 8.2% on solid revenue growth, but the nation’s second-biggest cable-television provider saw the same weakness in subscriber additions in July felt by its larger cable counterpart, Comcast Corp.

.

News Corp Reports Q4 and Full year Results – TV Station Operating Income up 13%

News Corp’s Q4 revenue increased by 6% and it hauled in Net Income of $875m.  Significantly, the company’s TV Operating Income was up 13% versus the same period last year, driven by an improved TV station advertising market.

Here’s the full News Corp press release 

.

CBS 2Q TV Station Revenue Climbs 31%

According to leading industry website TV News Check, TV station revenue at CBS jumped by 31%. The company also realized a 17% increase in local broadcasting revenue (TV stations plus CBS Radio) to $678.2 million from $579.5 million in the year-ago quarter. Sumner Redstone, the company’s executive chairman called the results “Terrific”

Full story from TV News Check

.

Sinclair Broadcast Group Reports Q2 Results.

Sinclair Broadcast Group, one of the largest US TV station groups reported that its net broadcast Q2 revenues from continuing operations were up 19.3% versus the prior year.  The company had net income of $17.3 million versus $2.8 million in the prior year period.  Local net broadcast revenues, which include local time sales, retransmission revenues and other broadcast revenues, were up 16.6% in the second quarter 2010 while national net broadcast revenues, which include national time sales and other national broadcast revenues, were up 27.7% versus the second quarter 2009.

Full story from TV News Check

.

WSJ.com – Discovery Turns In 40% Decline in Profit 

According to an article in the Wall Street Journal, Discovery Communications posted a 40% drop in its second-quarter profit, hurt in part by costs related to its recent $3 billion debt refinancing. Still, the cable-network operator showed revenue and operating-profit growth, and announced a $1 billion share repurchasing program.

Full article from the Wall Street Journal

.

Barrington Sees 14% Jump In 2Q Revenue

Barrington Broadcasting Group announced that gross revenues for the quarter ended June 30 increased 13.6% to $32.7 million from $28.8 million for the same period a year earlier. The company said the increase was primarily due to 16.7% increase in national revenues, a 4.7% increase in local revenues, and an increase in political revenues of $900,000 to $1 million.

Full Story from TV News Check

.

Gray Beats Street

According to TVB, Gray Television came in ahead of analyst expectations for the second quarter. The pure-play TV group posted revenues of $75.6 million for the 36 stations, up 16 percent from a year earlier. Net income was $534,000 compared to a loss of $6.6 million a year ago. After payment of $6.4 million in dividends, net loss to common stockholders was $5.9 million, or 11 cents a share.

Full Story from TVB

..

.

Broadcast Industry M&A Continues

Blackmagic Buys Assets of Echolab

As predicted here last month, Blackmagic Designs announced that it has acquired “all the assets of Echolab,” putting Blackmagic in the production switcher business.

Echolab was forced into liquidation a few months ago when its primary shareholder stopped funding its operations.  The company had been in business for more than 35 years, specializing in low-end production switchers.

Blackmagic is buying Echolab for the latter’s ATEM product line, which was introduced about two years ago and has been continuously upgraded since under Echolab’s former CEO Nigel Spratling, who apparently not part of the Blackmagic deal and has now joined Ross Video in a marketing role.

This is great news for the affected Echolab employees, who were left jobless in an instant when the company shut its doors in mid-May.  It’s also good news for the industry, because the ATEM switcher product line, which looks like a pretty good product, will continue to be available through Blackmagic.  In fact, Blackmagic has said that it is adding to the engineering team responsible for ATEM.

It will be interesting to see how Blackmagic approaches the production switcher market, which is different than the company’s core post production market.  The part of the production switcher market where Echolab is active has considerable competition. In addition to Echolab, Sony, Panasonic, JVC, For-A and Ross Video are all very active players in this space.   

In addition to the competitive aspects of the deal, it seems to me that selling production switchers is a bit of a departure business-wise for Blackmagic.  Production switchers are a “high-touch” product category.  They are mission critical elements of the live production workflow, and as such they can require extensive demonstrations and training.  The majority of Blackmagic’s products are plug-in cards or stand-alone units, which are sold primarily through third-party dealers.  

At this point, I am unsure whether Blackmagic’s all-dealer sales approach is a positive or a negative for Echolab.  On the plus side, the compact HD production switcher market is a large and somewhat amorphous, running the gamut from broadcasters to corporation, to churches to education –  so it requires a large dealer network, which Blackmagic already has in place.  On the other hand production switchers require a specialized sales approach. Every buyer wants a demonstration, which typically involves shipping equipment and people, thereby increasing the cost of each sale.  Blackmagic will probably have to augment their approach somewhat in order to be successful selling production switchers.

Still if they can get the distribution right, Blackmagic may have a good chance of making their purchase of Echolab a success.  Blackmagic most likely paid very little for Echolab’s assets, and since it’s buying the assets and not the company, it gets a brand new HD switcher line, but not 35 years of legacy products that need support.  And Blackmagic does have experience buying distressed “traditional” vendors and changing their approach.  Last year, Blackmagic acquired leading color grading vendor Da Vinci Systems, and proceeded to radically change Da Vinci’s market approach, not to mention its pricing, turning a $200,000 hardware product into a sub-$1000 product according to TVB Europe.

Arguably however, Da Vinci’s color grading products (which are used off-line in post production) were easier to port to software platforms – and they still require a very expensive hardware controller.  Live production switchers are a different kettle of fish than off-line color grading systems for post production.  They are the key element of any live broadcast production, and they are still a relatively expensive hardware platform that requires specialist sales and support.

Blackmagic CEO Grant Petty is obviously familiar with this.  In the company’s press release that announced the deal he said: “I have been using live production switchers since I was in school where we covered local theater, sports, racing and bands. I think it’s the most exciting way to do production because it’s all live and thousands of people are watching what you are doing! Production switchers need to be powerful while also being familiar and easy to operate.”

Petty also said that “Since the acquisition, we have already dramatically expanded the engineering team working on ATEM. This fresh engineering team, which is a combination of new as well as experienced EchoLab staff, will allow us to move faster in adding new features to the ATEM product.”

Blackmagic will be displaying the ATEM on its booth at the IBC show next month. 

Here is a link to the full press release announcing the deal.

.

.

Transcoding Consolidation — Telestream to Acquire Anystream

Over at his always informative Business of Video blog, Streaming Media’s Dan Rayburn writes that Telestream is to Acquire fellow transcoding provider Anystream from parent Gab Networks.  This is a deal has long been rumored, and according to Rayburn has now been confirmed by the management of both companies.

There’s been quite a lot of activity in the transcoding space recently.  Ripcode was sold to RGB networks and Elemental Technologies announced other week that it had raised $7.5m of new venture money, bringing its total to $14m

.

.

 

 

Other Broadcast Technology Vendor News

Chyron Appoints New Chief Commercial Officer 

Chyron has appointed Susan Brazer as its new Chief Commercial Officer.  According to the company’s press release, Brazer has a big job, taking responsibility for “commercial strategy and all product and services revenues, directing its worldwide sales network of direct sales, resellers/systems integrators and joint ventures in Europe, Asia, Latin America and the Middle East.”

This is the second C-Level appointment recently.  The company previously announced that it had appointed Bonnie Barclay as VP and Chief Marketing Officer.

.

New COO at Vizrt

Vizrt has appointed François Laborie as its new Chief Commercial Officer. Laborie replaces David Zerah who left Vizrt to become managing director of gaming firm Dragonfish.

Laborie joined Vizrt at the beginning of 2006 as the Company’s Executive Vice President Marketing. At the beginning of 2010, he took on the additional role of Regional President for the EMEA region.

.

 

3D News

Technicolor announced this week that it has now installed its 3D system at 250 screens – good progress, but far less than clear leader RealD’s 7,500.

 

Mobile TV News

 According to an article in TVB,  Broadcast and WiFi Take Wind Out of FLO TV Sales 

.

Other News

The Financial Times reports that News Corp has refused to refuses to raise its offer for BSkyB 

.

Also in the FT, the BBC is under fire over Canvas project 

.

.

Market Research Note of the Week:

Who are the Most Important Decision Makers in Broadcast Technology?  Vendors Predict Shift Towards Operations and IT

In a recent article, “Broadcast Industry’s Largest Market Study Reveals Most Important Technology Trends,” the move toward file-based, tapeless workflows was highlighted as one of the most important issues to broadcasters today.

But how will this shift affect how broadcast technology products are purchased, not to mention who buys them? Traditionally, these products have been purchased primarily by engineers. Will this be the same for products that are increasingly IT-based, or will there be a new set of buyers? Broadcast vendors need to know this because a new set of buyers may require a new market approach.

To find out, we asked the nearly 800 broadcast technology vendors who responded to the 2010 Big Broadcast Survey who they feel is currently the most important decision maker in the sales process, and who they feel will be most important in two to three years.

Let’s start with the most important buyers today. Respondents were asked, “When selling your products/services, which category of customer is typically the most important decision maker today?” According to responses, broadcast tech vendors see engineering staff as their most important customers, followed by operations, IT and finance personnel. Engineers are clearly seen as the most important decision makers, with operations staff a distant second.

But what about the future?

To read the full article, including four charts that break down the results, click here.

%d bloggers like this: