Comtech means contact. Through its subsidiaries, Comtech Telecommunications operates in three divisions: mobile data communications, telecommunications transmission, and radio-frequency (RF) microwave amplifiers. The company makes equipment used largely by the US government and related defense contractors. Other customers include satellite systems integrators, communications service providers, and oil companies. Its transmission equipment includes modems, frequency converters, very-small-aperture terminal (VSAT) satellite transceivers and antennas, and microwave radios. Comtech's RF amplifiers enable wireless instrumentation and medical systems and provide satellite-based messaging services and location tracking.
The hit to the company's 2011 revenue came mainly from its largest customer: the US Army. While adverse global economic and political conditions worked against the company's RF microwave amplifiers segment, which was off by 18% on the year, its mobile data communications segment (nearly half of sales) took a 35% hit.
Sales to the military accounted for more than 60% of revenues in 2010 (up from 30% in 2009), and most of its mobile data communications business has come from two major military programs worth a combined $1.3 billion: the Movement Tracking System (MTS) and Blue Force Tracking (BFT). In 2011 the MTS contract expired and that work was consolidated into the BFT-1 program (and nearly all of that contract's $384 million worth of work had been ordered by 2012). Furthermore, Comtech was not selected for the next-generation BFT-2 program, but the company is still in talks with the US Army to license to them certain intellectual property in support of the MTS and BFT-1 programs.
That sounds heavy on the gloom and doom, but Comtech has taken heart in its core business separate from those programs, which increased 2.5% in 2011. The losses in those military programs will be too much to overcome for 2012, but the company believes the other parts of its core business provide a good foundation for growth. Microsatellites and related components help make up this segment, and are used on space missions primarily from the US DoD and NASA.
Despite the decline in sales, margins improved, but the year-over-year increase in profit wouldn't have been achieved without the receipt of a merger termination fee in connection with its busted acquisition attempt of CPI International in 2010. (The acquisition would have nearly tripled the size of Comtech's RF microwave amplifier business.) Without that fee, income before taxes would have fallen to $89.3 million, its second worst result (better only than 2009) in the last five years.
Its telecommunications transmission segment, considered by the company to be its "backbone," saw nearly 6% more revenue on the year (rebounding to nearly 40% of sales) due to increased demand for its over-the-horizon microwave systems, while demand weakened for the segment's satellite earth station business. Comtech's telecommunications transmission segment offers a broad range of satellite earth station equipment (the company's largest single product line), primarily to commercial customers, including satellite earth station modems, BUCs, power amplifiers, transceivers, access devices, voice gateways, IP encapsulators, and media routers. Its products are marketed under the brand names AHA, Comtech EF Data, Memotec, Radyne, Verso, and Vipersat.
The RF microwave amplifiers division manufactures satellite earth station traveling wave tube amplifiers (TWTA) and solid-state, high-power, broadband amplifiers (SSPA) used to boost signal strength for applications such as remote-controlled improvised explosive devices.
Comtech maintains a decentralized structure to allow regional leaders to adapt more quickly to the needs and changes in their respective markets. It also continues to be open to finding acquisitions.