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Activist shareholder seeks Comtech board seats

Melville-based Comtech Communications Corp. has won a $38-million

Melville-based Comtech Communications Corp. has won a $38-million contract for a small U.S. Navy spacecraft that will map the stars. Photo Credit: Handout

An activist shareholder has nominated two independent candidates for the board of Comtech Telecommunications Corp., a Melville-based defense electronics contractor that has had a series of recent setbacks.

Comtech in premarket trading Tuesday rose $0.52, or nearly 2 percent, on the news.

The shareholder, MMI Investments LP, said Monday that it nominated two candidates for the company's board of directors because of concerns about Comtech's declining revenue and earnings. MMI owns 3.3 percent of Comtech's outstanding shares

Comtech responded by saying it met with MMI representatives and was evaluating the proposal.

Comtech, with about 1,500 employees and a $700 million market capitalization, has been forced to diversify by seeking acquisitions in recent months, after it disclosed that its profits and sales were down sharply; and said it expects to do "significantly" less business with one of its mainstay customers, the U.S. Army.

The maker of satellite modems and transmission technologies reports income of $69.4 million on revenues of $729 million in the trailing 12 months.

Its full-year earnings report is expected to be released plans to release its latest quarterly earnings report after the market closes Tuesday.

Jerome Lande, a partner at MMI and one of the two directors MMI is nominating, said in a news release that there is an "urgent need for change" at Comtech.

"With the dramatic declines in revenue and earnings from the loss of the company's two largest contracts and management's and the board's potentially value-destroying acquisition strategy, we believe shareholders deserve better than the status quo," Lande said in the statement.

The Melville-based company is scheduled to report its latest financial results on Wednesday.

News of the military contracting setback came in Comtech's report for the three-month period ended April 30. Net income for that quarter was $14.3 million on sales of $131.1 million. That compared to $21.8-million income on sales of $216.3 million for the same quarter last year. This quarter's income of $0.47 per diluted share contrasted with the year-ago quarter's $0.67.

The company saw declines in both its mobile data communications and radio frequency microwave amplifiers segments.


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