Viasat is a California-based company that provides civilian and military land and satellite communications, internet and security systems. The company's stock price skyrocketed following news of a $1.96 billion deal with L3Harris (LHX.US). The acquisition of the Link16 system by the longtime subcontractor and integrator with ties to the Department of Defense coincided with the Pentagon's planned expansion of Link16 into the space domain:
- Viasat, as part of the contract, will provide L3Harris with tactical data transmission solutions, known as Link 16. Viasat's solutions will serve the U.S. and NATO militaries for communications between navies, ground troops and, ultimately, space troops. As of 2019, Viasat was developing a satellite called 'Link 16' through a contract with the U.S. Air Force Research Laboratory;
- Launching the satellite into space drags on for years although government pressure may make it go faster to test the Link16 terminal from low earth orbit (LEO). Lifting the satellites into space would help efficiently connect the entire army with a single communications network, however, it would also require expenditures to possibly defend the key satellite from possible downing;
- L3Harris' acquisition of Link16 is pending regulatory approval and is expected to be finalized in H1 2023. Viasat's division working on Link16 had a total of 450 employees. According to L3Harris, direct access to Link16 production will give the company a powerful market share in the Department of Defense because the network is a core component of the U.S. military's information connectivity structure, known as JADCC (Joint All Domain Command and Control);
- According to estimates, Link 16 generated $400 million annually for the company and accounted for about 35% of revenue for the Viasat Government Systems division. To date, more than 20,000 Link 16 terminals have been installed in NATO troops. Viasat's main competitor in the communications sector is Rockwell Collins, which has been acquired by Raytheon (RTX.US);
- The sale will enable the company to scale its own space and satellite business faster. Proceeds will also reduce the company's debt resulting from the final stage of its acquisition of Inmarsat, a British company operating in the same industry;
- According to CEO Mark Dankberg, that with the sale, Viasat's annual revenue solely from the sale of Government Systems will be around $700 million. With the completion of the huge merger with Inmarsat, valued at $5.5 billion, Viasat estimates that the Government business will generate up to $1 billion a year for the company;
- According to analysts at Vertical Research, the Defense Department is likely to approve L3Harris' acquisition of the Link16 system because of the protection of the intellectual value of the data exchange platform. L3Harris is a company with close connections to the Pentagon, under which Link16 would likely be 'safer' than at its current point, when it is owned by a commercial space company that can 'escape' regulation. William Blair analysts, on the other hand, point out that the sale of Link16's business is related to monetizing assets to raise capital to finance the expensive satellite business in an environment of aggressive competition from SpaceX and Starlink systems;
- On the day of Russia's invasion of Ukraine, Feb. 24, Viasat's modems were disabled by a targeted cyber event by which thousands of customers in Europe were left without internet for nearly a month, hurting the company's image. Viasat is now focusing on its acquisition of Inmarsat, which was finally approved by the UK government, ruling that the deal would not pose a threat to British national security. The review was conducted under the NSI Act, which since January of this year has given British regulators rights to intervene and control in acquisitions of key space companies. Under the agreement, Viasat will increase its R&D spending by 30% in Greater Byrtana. Viasat is still waiting for approval from the Federal Communications Commission, the Department of Justice and the European Commission.
Viasat (VSAT.US) shares, H1 interval. The stock opened today with a nearly 30% upward gap, which took the share price above the 200-session moving average, changing the main trend to upward. The RSI rose to overbought levels at the 80-point level. Also gaining close to 5% are shares of L3Harris (LHX.US) and another major satellite solutions provider, Echostar (SATS.US). Source: xStation
