(LLL) L-3 Communications Holdings Targets Insight Technology

February 25th, 2010

L-3 Communications Holdings Inc. (LLL) entered into an agreement to acquire Insight Technology Inc. Insight develops and manufactures mission critical night vision and electro-optical equipment including laser aiming and illumination devices, laser rangefinders, laser markers and designators, night vision goggles and monoculars, and thermal imaging systems.

Headquartered in Londonderry, New Hampshire, Insight employs approximately 1,100 people. Insight’s products are used by the U.S. military, federal law enforcement agencies and other nations.

L-3 Communications expects to complete the acquisition in the second quarter of 2010. The acquisition will expand and broaden L-3 Communications’ warrior systems capabilities. L-3 Communications’ strong balance sheet provides financial flexibility in matters of earnings accretive acquisitions Incorporatedremental dividend, and ongoing share repurchases.

As of Jan 28, 2010, the company had a low debt-to-capitalization of 38.2% (Zacks industry average was 99.2%), total long-term debt was $4.1 billion along with cash holdings of $1 billion and unutilized credit facility close to $900 million.

Headquartered in New York, L-3 Communications is a leading provider of Intelligence, Surveillance and Reconnaissance (ISR) systems and products; secure communications systems; aircraft modernization, training and government services; and is a merchant supplier of a broad array of high technology products.

L-3 functions through four primary business segments: Electronic Systems; Government Services; Aircraft Modernization and Maintenance; and Command, Control, Communications and Intelligence, Surveillance, and Reconnaissance (C3ISR).

L-3 Communications remains a key player within the defense segment and mainly competes with FLIR Systems Inc. (FLIR), Herley Industries Inc. (HRLY), and Raytheon Company (RTN). We believe it is one of the best-positioned pure defense plays by virtue of its non-platform focus, and broad diversification of programs.

Our bullish outlook for L-3 Communications is supported by its strong performance mainly from the command, control, communications, intelligence, surveillance and reconnaissance (C3ISR) equipment, precision-guided weapons, unmanned aerial vehicles, and other electro-mechanical robotic capabilities, networked information technologies, special operations forces, and missile defense. However, these are partially offset by risks related to key projects execution, divestitures, higher pension funding, and declining Linguist and commercial businesses revenues.

We maintain our market Neutral recommendation stock.

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(LLL) L-3 Communications Holdings Targets Insight Technology

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