PARIS — Satellite ground equipment providerTelecommunications Corp. is positioning itself to return to the winner’s circle with the U.S. Army’s next-generation satellite-based friendly forces tracking system.
The loss of BFT-2 to rival ViaSat Inc. of Carlsbad, California, was a blow to Melville, New York-based Comtech and was part of a general slide in U.S. government business that resulted in a multiyear slide in revenue and operating profit.
During that time, a slimmer Comtech emerged with a customer set turned upside-down from where it was before the BFT-2 loss: In 2010, the U.S. government accounted for 71 percent of Comtech’s revenue, with international customers at 23 percent and domestic non-U.S. government at 6 percent.
For the year ending July 31, U.S. government customers accounted for 28 percent of Comtech revenue, international customers were 59 percent and domestic customers, 28 percent.
More importantly, Comtech reversed the decline in total revenue that since 2010 cut sales in half. For the year ending July 31, revenue was $347.2 million, up 8.6 percent from the previous year. Operating income was 12.6 percent of revenue, up from 10.8 percent a year ago.
The company is debt-free and had $154 million in cash as of July 31. With Comtech now half its former size — revenue in 2010 was $778 million — and the U.S. Defense Department budget still under heavy pressure, it was perhaps inevitable that Comtech would seek a strategic transaction. In August, the company confirmed that it was looking at alternatives including selling itself or making a large acquisition.
In an Oct. 10 conference call with investors, Comtech Chief Executive Fred Kornberg declined to comment on the ongoing process beyond saying that it may come to nothing.
For the moment, Comtech is focusing on growing its business with international sales of its commercial satellite Earth station equipment and its solid-state power amplifiers and traveling-wave tube amplifiers for satellite ground equipment. Comtech has told investors that its 500-watt Ka-band power amplifier is well placed in the commercial satellite communications market, where multiple fleet operators are moving to high-throughput spacecraft, many in Ka-band.
In an example of new markets opening for companies like Comtech in satellite communications terminals, Comtech is providing hardware to outfit Royal Caribbean Cruises ships with higher-throughput satellite links.
Royal Caribbean is one of several companies, in markets including commercial shipping and offshore energy production, that are testing different satellite communications technologies in Ku- and Ka-band.
Kornberg said the company’s overall business will grow again during the current fiscal year, by about 4 percent. Most of the satellite Earth station business opportunities, he said, are international.
Comtech’s Mobile Data Communications business has not yet recovered from the BFT-2 loss and revenue for this division was down again, by 27.5 percent to $27.7 million, for the year ending July 31.
In the conference call and in a filing with the U.S. Securities and Exchange Commission, Comtech — which has always said it would pounce on any BFT-2 performance weakness to return as the Army’s contractor — said it will “aggressively pursue” an Army request for information from prospective bidders for a BFT-2.5 system.
In its filing, Comtech said the transceivers used in BFT-2 have “certain shortcomings,” which the company did not spell out, that could provide an opening for Comtech. Comtech’s main competitors in this market are ViaSat and Northrop Grumman Corp. of Falls Church, Virginia.
The Army has continued to pay $10 million per year to Comtech for intellectual property related to BFT-1 as part of a “sustainment” contract that spans three years ending in March 2015 and should provide $68 million in revenue. Thousands of tanks, aircraft and other vehicles carry BFT technology, designed to reduce so-called friendly fire incidents.
Comtech said it has been informed by the Army, if only informally, that the BFT-1-related business will continue for several more years. The Army’s obligation to pay the annual $10 million license fee for Comtech BFT technology ends in March 2017, after which the Army will have nonexclusive use of the technology free of charge.