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Comtech says its U.S. Army sales to slow

Comtech develops high-tech communication systems.

Comtech develops high-tech communication systems. Photo Credit: Handout

With its quarterly earnings report showing that profits and sales are down sharply, the defense electronics contractor Comtech Telecommunications Corp., of Melville, disclosed this week that it expects to do “significantly” less business with the U.S. Army.

For that reason Comtech plans to use some of its $590 million in available cash to shop for companies to acquire, as a means of increasing revenue and profits, the company said.

News of the military contracting setback came in Comtech’s report for the period ending April 30.

Net income for the third quarter of fiscal 2011 was $14.3 million on sales of $131.1 million. That compares to $21.8 million income on sales of $216.3 million for the third quarter of fiscal 2010. 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. Those losses were offset, in part, by higher net sales in Comtech’s telecommunications transmission segment.

"We continue to expect future annual sales and related operating income from the U.S. Army to significantly decline from current levels,” Fred Kornberg, president and chief executive officer, said in a prepared statement.

“Nevertheless, I remain optimistic about our future direction,” Kornberg said. “With deployable cash of approximately $590 million, we continue to focus our acquisition efforts on a number of opportunities that we believe would complement our existing businesses, diversify our customer base and align with our long-term strategy.”

Comtech, with a workforce of about 1,500 employees, has a market capitalization of $650 million,

Its share price dropped, in heavy trading, on the news, disclosed Tuesday, about the setback in Army contracts. The stock closed at $27.16 Monday, then began a two-day slide that left the price at $24.11 at Wednesday’s market close.

Photo: A Comtech antenna and its tropo system.

 

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