June 12, 2020 | International, C4ISR
By: Jill Aitoro
WASHINGTON — One year post merger, L3Harris is a third of the way to its goal of shedding roughly $1.5 billion of the company, with COVID-19 slowing progress, said its two top executives in an interview with Defense News.
About $500 million in business has been divested since June 2019, when Harris and L3 Technologies combined into a single, $17 billion company. That total came by way of three deals that shed the EOTech business, the night vision business, and the security detection and automation businesses.
“Out of the gates, we were really running at this,” said CEO Bill Brown, who noted in previous interviews the audacious goal for divestitures of 8-10 percent of total revenue. “We continue to make progress on others, but obviously with the COVID crisis and the financial impacts of that, it's moved some opportunities to the right.”
The sale of the security detection and automation businesses to Leidos for about $1 billion will ultimately be one of if not the biggest divestiture for the company, said Brown, who declined to point to any specific portions of business as currently up for sale or likely to be shed.
Thus far divestitures have been driven either by overlap created by the merger — which subsequently raised the alarm bells of regulators — or by a desire to focus the portfolio even more to become what Brown described as a “powerhouse C4ISR company.”
Brown stopped short of stating any intention to exit the commercial or federal business altogether — even as the former took a significant hit from pandemic fallout: Commercial revenues are expected to be down around 35 percent organically for the year.
Also likely to suffer from the COVID-19 pandemic is international business. Foreign sales, which account for 20 percent of total revenue, will likely remain flat, versus the increase in low to mid-single digits previously expected.
“We identify that as an area where we think we can outperform,” Chris Kubasik, L3Harris chief operating officer, said during the interview. “Clearly the global pandemic applies some pressure, especially in the Middle East with the prices of oil and all the countries having their own bailouts or stimulus plans. Just like the U.S., I think the situation is going to call into question how those countries deal with defense going forward. It's going to be one of these areas that we need to monitor, and are probably going to have to take market share to grow.”
An inability to travel has, however, opened doors to new ways of doing business around the world. Kubasik pointed to a particular deal with a customer in a Far East country that was negotiated via Skype.
“Nobody's really closed for business,” he said. “We've just got to be creative and do it differently. You feel pretty good when you do a one- or two-hour Zoom [video conference], where in the old days it would have taken four days by the time you flew to the country, cleared customs, got a good night's rest, held a meeting, met again and flew back.”
For L3Harris, year two post merger will focus on the remaining $1 billion in divestitures and see a continuation of company integration. In the longer term, those efforts will set the company up nicely for additional acquisitions, which Kubasik called “a clear expectation” for spurring growth.
And C4ISR is the area that will likely be the focus of potential buys.
“The value of those capabilities and technologies will be even greater in the future in a near-peer competition,” Brown said. “It's not the platforms, but what the platforms do and how they interoperate that requires networks and new ways of communicating, which is in the sweet spot of the company. So I would imagine that anything we would do through acquisition would happen in that broad C4ISR domain.”
But for now, he added, the company is focusing on “the basic fundamentals."
"And if we do that really well, then we build credibility to go and do another acquisition, another merger over time. The key is earning the right to do that — building the credibility and the muscle to go down that path, and that's what we're doing today.”
May 11, 2021 | International, Naval
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September 23, 2020 | International, Aerospace, Naval, Land, C4ISR
David B. Larter WASHINGTON — The U.S. Navy and Marine Corps both say they need expanded surveillance capabilities for a potential fight with China, but the Marines have cut bait on a big, ship-based system that some analysts say would make a big difference for both services. The Chief of Naval Operations' air warfare lead said earlier this month that every carrier strike group commander needs more surveillance, and he wants to find a way to get more pure intelligence, surveillance and reconnaissance drones flying off the flight decks of Navy ships as soon as possible. That aligns with the Marine Corps' goals of having more ISR and network connectivity resident in the amphibious ready group/Marine expeditionary unit construct, as it is in the carrier strike group with the E-2D Advanced Hawkeye. But with the Marine Corps moving away from a large unmanned platform known as the “Marine Air-Ground Task Force (MAGTF) Unmanned Aerial System (UAS) Expeditionary,” it's unclear if the Navy and Marine Corps will be able to find common ground on the way forward. When asked if the Navy was moving toward more organic ISR on Navy flight decks, Air Warfare Director Rear Adm. Gregory Harris told the virtual audience at the annual Tailhook symposium that he was trying to find alignment with the Marine Corps' need for a medium-altitude, long endurance drone system. “Every strike group wants to know more and more and more about his battlespace,” Harris said. "As we look at future vertical lift and the Marine Corps looks at their MUX or Medium Altitude Long Endurance system, [we're talking] about how we can find synergy between the Marine Corps and the Navy's pieces of the MUX/MALE program and our future vertical life (unmanned portion) — we want to bring that as far left as we possibly can in terms of synergy between the Navy and Marine Corps. “But I promise you there is not a strike group commander or fleet commander that can get enough ISR out there. And that aspect, from a distributed maritime operations standpoint, what we can bring from the strike group whether it comes off a carrier, a DDG or the future frigate or comes off Triton, that is fantastic.” The Marines were examining a tilt-rotor drone that could take off from from a DDG or a big-deck amphibious ship, but Deputy Commandant of the Marine Corps for Aviation Lt. Gen. Steven Rudder told USNI News in March that the Marines couldn't get the kind of range and endurance they wanted from a tilt-rotor done while packing all the power and cooling it needed for high-end communications and early warning systems. “What we discovered with the MUX program is that it's going to require a family of systems. The initial requirement had a long list of very critical requirements, but when we did the analysis and tried to fit it inside one air vehicle,” they realized they had competing needs, Rudder told USNI. Analysts are divided on whether that's the right idea. Bryan McGrath, a retired destroyer skipper and consultant with The FerryBridge Group, said the Marines gave up too early on the concept, and that it works against the Marine's stated goal of becoming an arm of naval power. “The Marine Corps wishes to go forward fast, and that is a land-based, medium-altitude, long-endurance UAV solution,” McGrath said. “I think it's suboptimal. I think it is a blow to this whole concept of integrated American naval power.” Packing all that capability into a land-based system tethers the capability to basing rights agreements. But another consideration is that capability will be at the mercy of the theater commander, which means the Marines may get less use out of them than they anticipate. “I believe the Marines will find that those assets will be a lot more difficult to keep control of than they think they will be with respect to tasking once they are in theater.” McGrath said. "There will be customers for those ISR assets that will greatly exceed the tactical level of the requirement. “I think the Marines are making a mistake not working closely with the Navy to come up with an organic, ship-based MALE solution. All this does is push the horizon for such a necessary component of the ISR-T grid for the Western Pacific even further into the future. And all for a suboptimal, short-term approach to trying to solve its problems, and I think they are going to find that it will not solve their problems.” But the Marines are nothing if not aggressive, and Marine Corps Commandant Gen. David Berger has clearly prioritized speed in his quest to reshape the service. Dakota Wood, a retired Marine officer and analyst with The Heritage Foundation thinks that's the right approach. “I think they have to go separate paths,” Wood said when asked about the Marines' embrace of land-based air. "I think the more you combine multi-service efforts into a single program, it gets bogged down by all the competing requirements. “The expense goes up, the ability to deliver capability ends up being less than was originally hoped for. And then these competing, or even conflicting requirements clash and it mucks up the whole thing.” Breaking the MUX program into multiple systems has the advantage of spreading out capabilities, and relying on platforms already in production will speed everything along, Wood said. “I'm a huge advocate of prototyping and trying multiple paths, and that costs a bit of money to do that, but you end up with a variety of platforms, all with unique contributions to the overall capability set,” he said. “The Navy has a habit of loading on additional requirements. They look for very robust, long-lifespan capabilities. And of course, the expense and complexity go up. Manufacturing time goes up. There is a delay in getting a capability in the fleet. I like the Marine Corps' aggressive posture: There is a sense of urgency.” https://www.defensenews.com/naval/2020/09/21/did-the-us-marine-corps-give-up-on-a-big-ship-based-surveillance-drone-too-so