Harris Corporation to acquire Schlumberger Global Connectivity ...

Harris Corporation to acquire Schlumberger
Global Connectivity Services business
November 8, 2010
RF COMMUNICATIONS • GOVERNMENT COMMUNICATIONS SYSTEMS • BROADCAST COMMUNICATIONS
Schlumberger GCS, 1
November 2010

Forward looking statement
Statements in this presentation that are not historical facts are forward-looking
statements that reflect management's current expectations, assumptions, and
estimates of future performance and economic conditions. Such statements are
made in reliance upon the safe harbor provisions of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements in this presentation include but are not limited to:
anticipated timing of the closing of the acquisition of Schlumberger Global
Communications Services and satisfaction of the conditions of closing, the
impact of the acquisition on Harris earnings, and statements regarding revenue
and growth opportunities. The company cautions investors that any forwardlooking
statements are subject to risks and uncertainties that may cause actual
results and future trends to differ materially from those matters expressed in or
implied by such forward-looking statements. Further information relating to
factors that may impact the company's results and forward-looking statements
are disclosed in the company's filings with the SEC. The forward-looking
statements contained in this presentation are made as of the date of this
presentation, and the company disclaims any intention or obligation, other than
imposed by law, to update or revise any forward-looking statements, whether as
a result of new information, future events, or otherwise.
Schlumberger GCS, 2
November 2010

Overview of Schlumberger Global
Connectivity Services (GCS)
• Global provider of end-to-end managed communications
solutions including satellite (VSAT), global terrestrial networks,
wireless connectivity and custom design/engineering for
customers primarily in the oil and gas industry
• Expected calendar year 2010 revenue of $170 million, EBITDA of
$41 million and operating income of $31 million
• Customers include global integrated energy companies and oil
and gas services companies – with parent company,
Schlumberger Limited, representing about 20% of revenue
• Global operations include 400 employees in more than 25
countries, 12 globally deployed teleports, and headquartered in
Aberdeen, Scotland
Schlumberger GCS, 3 November 2010

Strategic rationale
• Supports Harris growth strategy
– Providing assured communications solutions in new vertical
growth areas
– Expanding Harris international footprint
• Expands Harris position as a global provider of mission-critical,
end-to-end managed satellite communications solutions
• Combined with recently acquired CapRock, creates a managed
satellite communications business with fiscal 2011 pro forma
revenue approaching $600 million
• The combined technicians and equipment globally distributed
offer customers superior field support
Schlumberger GCS, 4 November 2010

Target segments demand mission
critical communications
Energy will be 80% fossil fuels through 2030, & deepwater
sites will be a critical source
Schlumberger GCS, 5
Deepwater CAPEX Spending by Region
2009-2013 CAGR = 13%
Source: The World Deepwater Report 2010-2014, Douglas-Westwood
The maritime market is transforming to „always-on‟ satellite
services for the 16,000 largest vessels
Maritime VSAT
2009-2013 CAGR = 36.9%
Note: All figures are rounded, the base year is 2008. Source: Frost & Sullivan
The US Government relies on commercial satellite for 80% of
its communications. Demand is rapidly increasing.
US Gov‟t/Military Commercial Satellite Spend
2009-2013 CAGR = 24%
Source: Northern Sky Research & GCS Estimates, November 2009
Worldwide demand for
Commercial Satellite Services is
expected to exceed $8 billion
per year within 5 years*
*Source: Frost & Sullivan World VSAT Market Analysis 2009
November 2010

Customer base
Government Energy / Oil & Gas
Energy / Oil & Gas
Commercial Maritime
Schlumberger GCS, 6 November 2010

The Schlumberger GCS infrastructure
is complementary to CapRock
CapRock Teleport Partner Teleport
Nigeria
CapRock Service & Support Center
CapRock POP
CapRock Regional Office
Schlumberger GCS Teleport Schlumberger POP
Operational hubs
Countries of Operation
Combined infrastructure also provides opportunities
for significant network efficiencies
Schlumberger GCS, 7 November 2010

Deal terms
Consideration • $397.5MM in cash
Tax Benefits • Harris to step-up tax basis in assets acquired
• Tax step-up net present value of $50MM
• Reduces “net” purchase price to $347.5MM
Structure • Purchase of assets and assumption of certain
Key conditions
& timing
liabilities
• Customary regulatory approvals and conditions
• Closing expected during the third quarter of fiscal 2011
(first quarter of calendar 2011)
Schlumberger GCS, 8 November 2010

Schlumberger GCS summary
financials and outlook
Schlumberger GCS, 9
CY08 CY09 CY10E
Revenue $176 $178 $170
% growth 16% 1% -4%
EBITDA 36 49 41
% EBITDA margin 21% 28% 24%
EBIT 28 39 31
% ROS 16% 22% 18%
November 2010

Harris CapRock Communications
+
A combination that creates a leading global provider of
managed satellite communications services primarily serving
customers in the energy, government and maritime industries
Schlumberger GCS, 10 November 2010