Harris Corporation First Quarter Revenue Increases 30%; Revenue Growth Posted by All Four Operating Segments

Company Increases Fiscal Year 2008 EPS Guidance

Harris Corporation (NYSE:HRS) reported that revenue for the first quarter of fiscal year 2008 increased 30 percent to $1.2 billion, compared to $947 million in the prior-year quarter. Organic revenue growth was 13 percent. Orders in the first quarter of fiscal 2008 were $1.4 billion, an increase of 24 percent compared to the prior-year quarter.

Net income was $100 million, or $.73 per diluted share, compared to $83.9 million, or $.60 per diluted share, in the prior-year quarter. Non-GAAP net income, excluding acquisition-related costs, was $104 million, or $.76 per diluted share, compared to $96.8 million, or $.69 per diluted share, in the prior-year quarter. The prior-year quarter benefited from a favorable tax settlement of $12 million, or $.08 per diluted share. A reconciliation of GAAP to non-GAAP financial measures is provided on Tables 5 and 6 along with accompanying notes.

“Excellent first quarter growth included strong sales of our Falcon® tactical radio systems and organic growth across the Government Communications Systems segment in Civil and National Intelligence Programs, and IT Services, said Howard L. Lance, chairman, president, and chief executive officer. ”Revenue in the quarter also benefited from the June 2007 acquisition of Multimax Incorporated and from Harris Stratex Networks, Inc., formed in January 2007. Orders were significantly higher than revenue, providing solid momentum for continued growth throughout fiscal year 2008.

Defense Communications and Electronics
First quarter revenue in the Defense Communications and Electronics segment was $429 million, an increase of 13 percent compared to the prior-year quarter. Operating income increased 21 percent to $132 million.

RF Communications Division revenue increased 20 percent compared to the prior-year quarter. Tactical radio demand was strong in both the U.S. government and international markets and across all product lines, including Falcon II HF (high-frequency) and multiband radios, and Falcon III handheld radios and vehicular systems. RF Communications backlog increased in the first quarter to about $1 billion.

Harris Falcon II and Falcon III radios are being installed in new Mine Resistant Ambush Protected (MRAP) vehicles for the U.S. Army, Navy and Marine Corps. During the quarter, Harris received $26 million in additional MRAP orders from the U.S. Navy. Delivery of MRAP vehicles continues to be a priority for the Pentagon.

Also during the quarter, Harris received a $104 million order for Falcon II HF radios and a $42 million order for Falcon II multiband radios from the U.S. Army. The company received $68 million in orders from the U.S. Navy for Falcon II HF and multiband radios and Falcon III handheld radios. Harris received a $25 million order to provide the U.S. Marine Corps with remote control systems that allow radio use at a distance up to 3.5 kilometers.

In the international market, Harris was awarded a $76 million contract to supply the government of Pakistan with Falcon II HF radios. Orders were also received in the quarter from the governments of Algeria, Kazakhstan, Saudi Arabia, and the United Arab Emirates Royal Guards.

In the Defense Programs business, revenue declined 3 percent. Year-over-year revenue increased on a number of major communications programs, including the CDL (Common Data Link) Hawklink program for the U.S. Navy, the U.S. Army WIN-T (Warfighter Information Network-Tactical) program, the LMST (Lightweight Multiband Satellite Terminal) program for the U.S. Marine Corps, and the MIDS (Multifunctional Information Distribution System) terminals program for Department of Defense aircraft. Aircraft electronics revenue declined in the quarter, primarily as a result of the transition of the F-35 Lightning II program from the development phase to the low-rate initial production phase.

Government Communications Systems
First quarter revenue in the Government Communications Systems segment was $490 million, an increase of 43 percent compared to the prior-year quarter. Organic revenue increased 16 percent, excluding the impact of the acquisition of Multimax. The segment includes Civil and National Intelligence Programs, and IT Services.

Revenue drivers in the segment included the continued rollout of long-term systems integration contracts, including the FDCA (Field Data Collection Automation) program for the U.S. Census Bureau, the FTI (FAA Telecommunications Infrastructure) program, and equipment upgrades for the FAA VSCS (Voice Switching and Control System) program. The segment also had growth in classified development programs for National Intelligence customers and the Patriot IT services program for the NRO (National Reconnaissance Office). Segment revenue also benefited from the NMCI (Navy/Marine Corps Intranet) program and the NETCENTS program for the U.S. Air Force, both part of the Multimax acquisition.

Operating income for the segment was $43 million in the first quarter. Operating income benefited from strong year-over-year organic revenue growth, the Multimax acquisition, and the successful re-negotiation of pricing on an IT services contract. Income was negatively impacted by additional schedule and cost overruns on commercial satellite reflector programs.

During the quarter, Harris was among a number of companies awarded the 5-year ALLIANT Government-Wide Acquisition Contract by the U.S. General Services Administration. ALLIANT will allow Harris to provide integrated IT product and services solutions to support a number of federal agencies. Also during the quarter, Harris won a $25 million IT services contract with the U.S. Navy, an $11 million program with NOAA (National Oceanic and Atmospheric Administration), and an $8 million follow-on IT services program with the U.S. Army.

Broadcast Communications
First quarter revenue in the Broadcast Communications segment was $147 million, an increase of 5 percent compared to the prior-year quarter. Operating income was $10 million, an increase of 18 percent compared to the prior-year quarter. The segment is benefiting from cost-reduction actions completed in the prior year.

Double-digit growth continued in the Video Infrastructure & Digital Media business, which provides systems for routing, master control, networking, test and measurement, multi-image processing, servers and graphics.

Revenue in Software Systems was slightly higher than the prior-year quarter, while revenue in Transmission Systems declined, due to lower international transmitter sales and the exit from the radio resale business, which occurred during the fourth quarter of fiscal 2007. Sales of digital transmitters improved, as broadcasters prepared for the February 2009 FCC-mandated transition to digital broadcast technology.

The Broadcast Communications segment continued to benefit from the Harris ONE™ initiative to provide interoperable, end-to-end workflow solutions that span the entire broadcast delivery chain. Harris integrated products are focused on the industrys transition to digital and high-definition services and on emerging media business and advertising models.

Orders in the first quarter were greater than revenue. Major orders included H-Class™ media software for Sony Entertainment Television, OSi-Traffic™ systems for Nexstar Broadcasting Group, NEXIO™ video servers for the American Forces Network and PBS (Public Broadcasting System), a significant order for digital signage infrastructure from the Venetian Hotel Macao, and an order from the Saudi Arabia Ministry of Culture and Information for products that span the companys high-definition portfolio.

The company shipped its first CENTRIO™ multiviewers in the quarter. CENTRIO, an award-winning multi-image processor, has gained early market recognition as a solution for streamlining complex, large-system, multi-display monitoring applications. Orders for the new system have been very strong.

Harris Stratex Networks, Inc.
First quarter revenue for the Harris Stratex Networks segment was $172 million, an increase of 7 percent compared to the prior-year quarter on a pro forma, non-GAAP basis (as if the former Harris Microwave Communications segment and Stratex Networks had been combined since the beginning of fiscal year 2007). The segment reported a first quarter operating loss of $1 million. Non-GAAP operating income, excluding integration costs associated with the business combination, was $7 million and was flat with the prior-year quarter. The segments higher mix of lower margin, low-capacity radio shipments dampened operating performance in the quarter.

Orders in the first quarter were higher than revenue and reflected strong demand for wireless infrastructure systems across North America and international markets.

Demand continues to be driven by geographic footprint expansion, increased bandwidth requirements to support new services such as 3G and WiMAX, and network hardening and interoperability requirements for public safety. New market demand also is coming from the adoption of IP network technology, as operators converge voice and data networks to provide more advanced, revenue-producing services at lower costs. Harris Stratex Networks portfolio of products delivers software-scalable systems to achieve capacity migration, broad frequency coverage, and network support for both traditional voice and IP traffic.

Harris Stratex Networks (NASDAQ:HSTX) management will host a conference call and webcast (www.harrisstratex.com) today at 5:30 p.m., Eastern Time, to discuss financial results for their fiscal year first quarter.

Outlook and Guidance
Harris increased its non-GAAP earnings guidance for fiscal year 2008 from a range of $3.30 to $3.40 to a new range of $3.35 to $3.45 per diluted share, excluding integration charges related to the acquisition of Multimax and the formation of Harris Stratex Networks. Non-GAAP earnings guidance represents a year-over-year increase of 21 percent compared to non-GAAP earnings for fiscal year 2007. The corresponding fiscal year 2008 GAAP earnings guidance is in a range of $3.28 to $3.38 per diluted share.

Revenue in fiscal year 2008 also is expected to increase 21 percent above fiscal year 2007. A reconciliation of GAAP to non-GAAP earnings guidance is provided on Table 7 and in the accompanying notes.

Harris will host a conference call today at 4:30 p.m., Eastern Time, to discuss the above items. Interested individuals are invited to listen to the call by using a dial-in number: (719) 325-4792, access code: 2463742. The conference call also will be broadcast live via the Internet at www.harris.com. A replay of the teleconference will be available beginning at 8:00 p.m., Eastern Time, and will run until midnight, Eastern Time, on Thursday, November 8. To access the replay, please call (719) 457-0820, access code: 2463742. A recording of the call will also be available on the Harris website beginning at 7:00 p.m., Eastern Time, on November 1.

Harris is an international communications and information technology company serving government, defense and commercial markets in more than 150 countries. Headquartered in Melbourne, Florida, the company has annual revenue of over $4 billion and more than 16,000 employees including nearly 7,000 engineers and scientists. Harris is dedicated to developing best-in-class assured communications products, systems, and services. Additional information about Harris Corporation is available at www.harris.com