Top 100: Exelis acquisition not the only bright spot for No. 11 Harris

For Harris Corp., 2015 was a busy year. After all, it’s not often that you make your largest acquisition to date and become one of the country’s top 10 defense contractors as a result.

Harris acquired Exelis, a global aerospace, defense, information and services company, on May 29, 2015, for $4.7 billion, giving the Melbourne, Fla.-based company about $7.5 billion in annualized revenue and 22,000 employees, 9,000 of whom are engineers or scientists. The Exelis segment contributed $279 million to Harris’ overall fiscal 2015 revenue of $5.1 billion, up slightly from $5 billion the previous year.

Harris’ companywide funded and unfunded backlog going into fiscal 2016 sat at about $12.2 billion, considerably more than the $7.2 billion backlog it had at the end of fiscal 2014. The company owns the No. 11 spot on the Top 100 list this year, up from No. 9 last year.

A year in, the post-acquisition transition is going smoothly, Harris Chief Executive Officer Bill Brown said in an email. Harris has reorganized into four segments – Communication Systems, Critical Networks, Electronic Systems, and Space and Intelligence Systems – and set up new leadership teams from both organizations. It has also started developing joint solutions, he added.

“Any integration, particularly one of this size, is a journey. I am very pleased with our progress to date and the outlook for the future,” Brown wrote. “We are executing well on all the things we said we would do as a result of the Exelis acquisition. We initially said we would deliver $120 million in annual synergies. Today we are ahead of plan and look to reach run rate savings exiting fiscal 2017 of $140 [million to] $150 million.”

The acquisition was not Harris’ only achievement in 2015, however. It continued its contract-winning streak in April 2015 with the Army’s tactical radio modernization platforms by earning a 10-year indefinite-quantity (IDIQ) contract with a $3.9 billion ceiling for the Rifleman Radio, a lightweight handheld device that transmits voice and data. 

Harris also won an IDIQ contract in September with a ceiling value of $390 million to supply a new specialized handheld tactical radio to U.S. Special Operations Forces, another IDIQ contract in April 2015 worth $238 million to design and implement a system that will disseminate real-time weather pictures to aviation users across the National Airspace System, and a $316 million contract from the National Oceanic and Atmospheric Administration in January to provide Cross-track Infrared Sounder instrument payloads for two satellites in the Joint Polar Satellite System.

Looking forward, Brown sees growth potential in all of Harris’ core businesses, including tactical communications, space, weather, air traffic management and electronic warfare. He’s also turning an eye overseas.

“Internationally, we see opportunities for new system-based solutions that leverage technologies from across our segments,” he wrote. “For example, we recently established a new organization in Australia to support regional demand for our broad range of defense-related solutions for customers in the area.  We expect other regions of the world will follow this model as well.”

The acquisition also opens doors, of course. The point of it was to create “a company with greater scale and a broader technology portfolio,” Brown wrote, adding that standardization and simplification will make it easier to push “operational excellence,” which leads to strong program performance.

“The best way to grow a business is to perform well on the business you already have,” he wrote. “If we keep focused on performing and executing well, our business will grow into the future.”

One challenge that the company is working to address is keeping up with the pace of change in the markets it serves, Brown wrote.

“That is evident already in areas such as tactical communications, where the militaries of the world are moving towards fully-networked forces, and in air traffic management, as the FAA deals with increases in manned and unmanned flight traffic,” he wrote. “To maintain our leadership, it is critical that we retain our innovative culture and agile, entrepreneurial mindset, so that we can continue to anticipate and drive change, rather than respond to it.”