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Comtech (CMTL) Revises Term for UHP's Acquisition Contract

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Zacks Equity Research
·4 min read
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Comtech Telecommunications Corp. CMTL recently announced a unanimous decision to extend the term of its agreement related to the acquisition of satellite communications service provider — UHP Networks, Inc. ("UHP"). Comtech is primarily known for designing, developing and manufacturing best-in-class products and services for a progressive communications infrastructure.

As a technology forerunner, Comtech operates through two segments — Commercial Solutions and Government Solutions. With the burgeoning demand for high-speed satellite-based networks in the end markets, the acquisition is likely to aid Comtech enhance its broad portfolio of solution offerings, specifically designed for the satellite ground station market on the back of UHP’s disruptive technologies.

Founded in 2005, Canada-based UHP Networks is mainly known for its role in the manufacturing of satellite networking equipment. With a rich industry experience, the company provides avant-garde satellite technology for video, audio and data transmission services. Its fundamental products include advanced Network Management System and UHP universal satellite routers.

Impressively, UHP is reckoned to be industry’s foremost fully software-defined, high-throughput VSAT (Very Small Aperture Terminal) router. Some of its expertise involves VSAT Hardware Manufacturing and Satellite Network Engineering. These efficient solutions are utilized by numerous Tier 1 telecom service providers and government agencies, and have been installed in more than 300 networks.

Interestingly, the acquisition was initiated in November 2019 for a purchase price of nearly $40 million. Currently, the agreement has been extended till Feb 28, 2021. The buyout of UHP Networks is likely to enable Comtech incorporate the groundbreaking Time Division Multiple Access technology of the former into Comtech EF Data Corp.’s HEIGHTS platform.

Apart from integrating next-gen technology, the transaction is expected to expand Comtech’s product line of high-capacity satellite equipment. Also, it will tap new relationships with Fortune 500 global companies, international government agencies and premier U.S. mobile network operators.

Comtech has created a niche market for highly secure wireless solutions to defend global security and improve public safety. The company continues to provide market-leading products for messaging, location and deployable wireless communications. It offers services to integrate networks, servers, gateways and intelligent peripherals, and provides transmission responses to users.

Customers depend on Comtech’s commercial wireless applications, which are based on innovative mobile cloud computing services like text messaging, public safety solutions, hyper-local search, workforce tracking, social applications as well as telematics and navigation. Federal government agencies also rely on Comtech’s cyber security expertise, professional consulting services and highly secure satellite solutions for mission-critical communications.

Current-year earnings estimates of the Melville, NY-based company have widened from a loss of $1.24 to a loss of $2.70 in the past 30 days, representing bearish investor sentiments about the stock as the deadly pandemic continues to affect financial markets globally. It remains to be seen if such an acquisition deal can help the company turn the tables in the near future.

Shares of the Zacks Rank #1 (Strong Buy) company have soared 48.4% compared with the industry’s growth of 19.1% in the past three months.

Some other top-ranked stocks in the industry are Aviat Networks, Inc. AVNW, Ubiquiti Inc. UI and Clearfield, Inc. CLFD. While Aviat Networks and Ubiquiti sport a Zacks Rank #1, Clearfield carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Aviat Networks delivered a trailing four-quarter positive earnings surprise of 11.8%, on average.

Ubiquiti delivered a trailing four-quarter positive earnings surprise of 27.9%, on average.

Clearfield delivered a trailing four-quarter positive earnings surprise of 44.3%, on average.

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