Mercury Systems (formerly Mercury Computer Systems) delivers digital signals faster than a winged messenger. The company makes real-time digital signal processing (DSP) systems for the homeland security, military and aerospace, and telecommunications markets. Its military systems process radar, sonar, and other signals. It also makes specialized electronics used in semiconductor wafer inspection and airport baggage screeners. Mercury Systems acts as a subcontractor to prime contractors such as Northrop Grumman and Raytheon. The company also provides intelligence, surveillance, and reconnaissance (ISR) systems to homeland security and intelligence agencies through subsidiary Mercury Federal Systems.
Mercury Systems operates in two business segments: Advanced Computing Solutions (ACS) and Mercury Federal Systems (MFS). ACS provides high-performance embedded computing systems for aerospace and defense, semiconductor, and telecommunications; it accounts for nearly 90% of the company's revenue. A latecomer to the defense industry, MFS, created in 2007 and headquartered outside Washington DC, designs, engineers, and deploys ISR systems for ballistic missile defense and electronic warfare.
Mercury Systems has research and development centers and other facilities in the US (Alabama, Massachusetts, New Hampshire, and Virginia), Japan, and the UK. It generates more than 95% of sales from the US; Europe and the Asia-Pacific region each account for about 2%.
Sales and Marketing
Together, Raytheon, Northrop Grumman, and Lockheed Martin account for more than 50% of revenue.
Total revenue rose 7% in fiscal 2012 (ended June) to about $245 million. A less than 1% drop in ACS sales was more than offset by a jump of 150% in MFS sales, which was driven by a wide area persistent surveillance project and revenue from newly acquired Paragon Dynamics. Net income jumped more than 20% to $23 million on the rise in sales and tight cost control.
Mercury Systems has gone through a number of reorganizations over the years to pare down its product portfolio and focus on its core business in embedded computing and other data-intensive applications. It also renamed itself from Mercury Computer Systems to Mercury Systems in late 2012 to more accurately reflect its business focus.
Since 2008 the company has sold off three unprofitable business segments that had hoped to tap the medical technology market, including biotech arm SolMap Pharmaceuticals; Visualization Sciences Group (VSG), which provided software developer toolkits for the science, engineering, manufacturing, and industrial sectors; and Visage Imaging (VI), which developed picture archival systems for the medical and life sciences markets.
Mercury Systems launched a restructuring initiative in 2012, which included the elimination of a about 40 positions and the transitioning of manufacturing activities from its Huntsville, Alabama, facility to contractors.
Mergers and Acquisitions
The company uses acquisitions to add products, services, and technical capabilities. Looking to bolster its sensor processing product line, in 2012 it bought microwave and radio-frequency (RF) components maker Micronetics in a deal valued at around $75 million, including $3.2 million of debt. The acquisition added new microwave and RF capabilities to Mercury's integrated subsystems for the defense and intelligence industries. More than three-quarters of Micronetics' sales come from defense applications, including electronic warfare, radar, electronic countermeasures products.
In early 2011 Mercury Systems paid $31 million in cash to acquire LNX Corporation, in a move to firm up its RF and signal processing capabilities related to the detection of improvised explosive devices (IEDs) found in combat areas. Late in the year, it bought KOR Electronics and its subsidiary Paragon Dynamics for $70 million in cash. The deal extended Mercury's ability to provide systems and software engineering services for intelligence and defense customers.