What is L-3 Communications Strategy for Growth and Expansion?

It is a well-known fact that the United States spends more on defense than the rest of the world’s top militaries combined, with an annual budget in excess of $683 billion. The US government spends more on the military than all 50 states combined spend on health and education. This military industrial complex funnels huge amounts of money in the form of government contracts to military contractors. Some companies in particular, L-3 Communications included, make billions of dollars from the US government. In 2011, it’s revenue from contracts totaled $15.17 billion. They are one of the largest contractors in command, control, communications, intelligence surveillance and reconnaissance, and aircraft modernization. Such contracts that have been awarded include the following:

• $357M task order for Army reserve distance learning
• $300M contract to provide Korea with Scarab systems
• $17.6M Navy UAV contract
• $6.5M contract to support tanker aircraft
• $58.5M contract for Navy aircraft training
• $10.2M contract for an undersea training range

It is apparent that government contracts make up a sizeable portion of L-3’s revenue, and with the current budget cuts and military drawdown underway, the company will have to look to other avenues to continue its growth and make up for losses. One such avenue would be an increased number of acquisitions. Just this year, L-3 acquired Data Tactics Corp, a move that reflects their current strategy of expanding business in the aerospace, electronics systems, and communications markets.

The acquisition added big data analytics and cloud computing services to their portfolio. The acquisition was the 2nd major deal that was made in the last 6 months. L-3 Communications is an American-based company that specializes in command and control, communications, intelligence, surveillance, and reconnaissance systems and products, as well as avionics, ocean products, space, and navigation products. Its largest customers are the US Department of Defense, the Department of Homeland Security, NASA, various US intelligence agencies, aerospace manufacturers, and commercial telecommunications customers.