Shares of Comtech Telecommunications Corp., of Melville, rose steadily in heavy trading Thursday reaching an 8 percent increase by midafternoon as the market reacted to reports that activist investors are seeking two board seats.
Nearly 1.5 million shares of Comtech (CMTL) had changed hands by 2 p.m. The stock's average volume in recent months is about 380,000 a day. Comtech closed at $30.88 a share, up $2.69, in Nasdaq trading.
Comtech last week filed its annual report for its fiscal year ending July 31, showing a sharp drop in net sales, to $612.3 million compared to $778.2 million, in part due to the company's loss this year of a contract for a U.S. Defense Department blue-force tracking system. Comtech's net income for the year was $67.8 million, up from $60.6 million the previous year.
Blue force tracking is a GPS-driven battlefield program, using satellite signals and in-vehicle monitors that allow monitors to see friendly forces on screen in blue and the enemy in red.
The activist investors are principals of the hedge fund MMI Investments Lp, who said they are concerned about Comtech's decision to achieve growth by buying other companies now that it has lost its mainstay U.S. Army contracts.
MMI owns 3.3 percent of Comtech's outstanding shares.
Comtech has publicly responded to MMI saying it met with the hedge fund's representatives and was evaluating its ideas.
With about 1,500 employees and a $700 million market capitalization, Comtech has been forced to diversify by seeking acquisitions in recent months.
Reuters reported this week that several companies, among them BAE Systems and General Dynamics Corp., were considering whether to make a bid for Comtech.
Reuters said it based the report on interviews with four people "familiar with the situation."
Comtech is working with Goldman Sachs Group for defense and strategic advice in response to pressure from the hedge fund, Reuters reported.