Business Profile: Harris Corp. Plays to Its Strengths
Over seven years, Harris has abandoned its diversification strategy to focus primarily on building high-tech equipment for governments.
Politics and persuasion
The 55-year-old Brown was, in some ways, a surprising choice to lead the transformation. Harris’ board hired him from United Technologies, where he had spent 14 years primarily on the commercial side of the company, overseeing everything from mergers and acquisitions to the company’s fire-and-security division. The board liked his experience in non-defense businesses; Lewis Hay III, Harris’ lead independent director, noted at the time that both United Technologies and Harris served “commercial and government markets.”
It didn’t take Brown long to decide the company needed a different approach. “Within the first year, I came to the conclusion, with a lot of strategy work that we did as a company and with the board, that we had to reposition ourselves back to our core capabilities.”
The shift was at times abrupt. Harris sold the commercial health care business in July 2015, just four years after buying it. And when it sold its communications business for the energy and maritime industries, it did so for nearly $150 million less than it had paid for the business seven years earlier.
The company’s new approach carries an obvious danger. “Domestic fiscal pressures are the most prominent downside risk,” analysts at Citigroup warned in a note to investors earlier this year.
But Harris’ timing has proven fortuitous so far, as a Republican White House and Congress ramp up defense spending after budget cuts during the Obama administration. Harris isn’t alone. Across the defense industry, executives are crowing about the outlook for military spending.
“This administration is intent on addressing the modernization issues. And, consequently, I do believe they are going to work hard to get some of these new activities underway here over the next couple of years in particular,” Northrop Grumman Chairman and CEO Wes Bush told analysts on a company earnings call earlier this year.
“I have to tell you that this is the most exciting time I have seen in my 30-plus years in shipbuilding,” Huntington Ingalls Industries President and CEO Mike Petters added on another company earnings call.
Harris has taken extra steps to make sure it claims as big a slice of the pie as possible by beefing up its presence in Washington. Brown reorganized Harris’ government relations operation so that Tania Hanna, a former Federal Communications Commission attorney who oversees Harris’ federal lobbying, now reports directly to him.
In addition, Harris has poached experienced lobbyists from rivals Motorola and Raytheon and hired a former staffer to the now-retired U.S. Sen. Barbara Mikulski, a Maryland Democrat who at one point chaired the Senate Appropriations Committee. Other company lobbyists have cycled back into public service, including a former aide to U.S. Sen. Bill Nelson who is now a staffer on the U.S. Senate’s Commerce, Science and Transportation Committee, and another former congressional aide who now works for the federal agency that advises the White House on telecommunications and information policy issues.
The company also has increased its spending on politics and persuasion. Harris has already donated more than $930,000 to federal politicians and political groups during the 2018 election cycle, according to the non-partisan Center for Responsive Politics; that’s a more than 50% increase over the $600,000 Harris donated during the entire 2012 cycle. And the company is now spending more than $2.5 million a year lobbying the federal government — including $4 million in 2014 alone — more than double what it was spending a decade ago.
The lobbying blitz has already paid dividends. Working with allies in the Department of Defense and Congress — including Senate Democratic leader Chuck Schumer of New York, where Harris’ tactical radio business is based — Harris successfully got the Army to open up some enormous hand-held radio contracts that had been held by rivals General Dynamics and Rockwell Collins. The result: Harris won a share of a 10-year, $3.9-billion contract from the Army for one kind of radio and a 10- year, $12.7-billion contract for another. The radio orders are a big reason some Wall Street analysts are upbeat about Harris near-term future.
“It’s important, as a government contractor, that we have a voice in how budgets are set and legislation is passed,” Brown says. “So I’m spending a lot of my time working very closely with legislators from the state of Florida as well as elsewhere around the country.”