[Satellite TODAY Insider 12-10-10] Comtech’s earnings-per-share in its first quarter of 2011 beat consensus estimates of 61 cents by 15 cents on revenues of $178 million, due to strong gains in the company’s mobile data segment, Comtech reported in its latest financial results, issued Dec. 9.
    Comtech Mobile Data revenues benefited from $15 million to $20 million in ruggedized MTS computers that were ‘pulled forward’ from future quarters, resulting in the segment beating revenue estimates by about 33 percent.  “We now expect all remaining MTS computers to ship by the end of the second quarter instead of by the end of 2011,” Comtech CEO Fred Kornberg said in a statement.
    Kornberg said that while Comtech expects its sales to the U.S. Army to decline in future quarters, the company, with $602.7 million in cash and cash equivalents on hand, will be looking at acquisitions soon. “Appropriate acquisitions are high on our to-do list. While it is too early to forecast the outcomes, our acquisition initiatives are currently centered on a number of opportunities that we believe would complement our existing businesses and that would align with our long-term strategy,” he said.
    Raymond James Analyst Chris Quilty told Satellite TODAY Insider that Comtech has more than enough resources available to pursue Kornberg’s strategy. “Comtech’s $20 million stock repurchase during the quarter gives the company $400 million of net cash. That’s plenty of firepower to pursue strategic acquisitions. Chastened by the failed CPI merger, management will presumably focus on more growth-oriented targets.”
    Comtech’s telecom revenues grew 5.3 percent year-over-year to $49 million in the first quarter, as Earth station bookings increased significantly from the fourth quarter of 2010. The results also included a $12.5 million break-up fee from the company’s failed merger with CPI International earlier in the quarter.
    However, Comtech’s 2011 first quarter bookings fell to $107.5 million compared to $120.6 million reported in the first quarter of 2010.  The company’s backlog also fell from $338.1 million at the end of July to $267.4 million at the end of October.
    But, Kornberg affirmed his company’s previous forecast that Comtech’s 2011 operating profit will be “comparable to FY10.” Quilty said Comtech can exceed this forecast by taking follow-on MTS/BFT orders, improving Earth station revenues/margins and targeted cost reductions.
    “Comtech’s better-than-expected results were driven by smart managerial decisions. Comtech’s management began implementing a series of cost reduction actions during the first quarter, including headcount reductions across all three business segments. Cuts were especially steep in the mobile data segment due to the recent loss of the BFT-2 contract. But, mobile data EBITDA margins surged more than 10 points to 23.6 percent – its best performance in two years – despite heavy shipments of low margin MTS computers. We suspect that cost reduction efforts along, with some favorable product mix, which might have included core MTS shipments, aided the results.”

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