Comtech Telecommunications Corp (CMTL) 2009 Q4 法說會逐字稿

Welcome to Comtech Telecommunication Corp's fourth quarter fiscal 2009 earnings conference call.

At this time all participants are in listen-only mode.

Later we will conduct a question-and-answer session.

As a reminder this conference is being recorded today, Thursday, September 24, 2009.

I would now like to turn the conference over to Ms.

Maria Salerno of Comtech Communications.

Thank you and good morning.

Welcome to the Comtech Telecommunications Corp conference call for fourth quarter and fiscal year-end 2009.

With us on the call this morning are Fred Kornberg, President and Chief Executive Officer of Comtech; Michael Porcelain, Chief Financial Officer; Jerome Kapelus, Senior Vice President, strategy and business development; and Frank Otto, Senior Vice President operations.

A news release on the Company's results was issued yesterday afternoon.

If you have not received a copy please call me and I will be happy to send to the you.

Before we proceed I need to remind you of the Company's Safe Harbor language.

Certain information presented in this call will include, but not be limited to information relating to the future performance and financial condition of the Company.

The Company's plans, objectives, and business outlook, the plans, objectives and business outlook of the Company's management, and the Company's assumptions regarding such performance, business outlook and plans are forward-looking in nature and involve certain significant risks and uncertainties.

Actual results could differ materially from such forward-looking information.

Any forward-looking statements are qualified in their entirety by cautionary statements contained in the Company's Securities and Exchange Commission filings.

I am pleased now to introduce the President and Chief Executive Officer of Comtech, Fred Kornberg.

Fred?

Thanks, Maria.

Good morning, everyone, and thank you for joining us today.

Yesterday afternoon we reported our fourth quarter and year-end fiscal 2009 report.

Before our CFO, Michael Porcelain, presents a financial overview, I would like to provide a brief summary of the actions we took, the accomplishments we made during a very challenging fiscal 2009 to position us for a strong fiscal 2010.

After Mike completes the financial overview, I will provide some color and insight for each of our three business segments, and then I will provide specific fiscal 2010 guidance.

As you know, fiscal 2009 got off to a terrific start.

On day one of our fiscal year we closed the Radyne acquisition.

There's no question that this acquisition has been an unequivocal success on all counts.

Our integration and related restructuring plan was almost flawlessly executed.

We realized all of our synergy expectations and we set the stage for what we expected would be a record year on all fronts.

No doubt heading into fiscal 2009 we were concerned about the economy, but despite our concern, during the first half of fiscal 2009 our commercial and government business in both our Telecommunications Transmission and our RF Microwave Amplifier segments remained relatively healthy.

While we may have avoided business slowdowns for far longer than many of our peers, we began to face tough headwinds during the second half of fiscal 2009, as the recession and credit crisis began impacting our customer base.

In addition, as we previously announced, the US Army requested that a significant portion of the orders we receive from them in fiscal 2009 be delivered in fiscal 2010.

The impact of these two issues adversely affected the remainder of our fiscal 2009, as both revenues and earnings were pushed into fiscal 2010.

On the positive side we recorded record full-year bookings in fiscal 2009, and with the shift of US Army deliveries from fiscal 2009 to fiscal 2010 we believe we're in a very strong position as we look forward to fiscal 2010.

Some of the important strategic bookings in fiscal 2009 included; greater than $400 million in new MTS orders; an $8 million order from the US Army to build, test, and deliver the next-generation high-capacity BFT-HC transceiver; over $19 million of orders for satellite modems and amplifiers for the government's GMT, or ground multiband satellite terminal program; and approximately $36 million of CREW 2.1 IED orders for our solid state jamming power amplifiers and solid state switches.

We believe that these orders demonstrate the ongoing and important role we continue to play on these programs.

In addition to these strategic bookings we also completed a number of important corporate actions.

We undertook cost reduction initiatives across the Company to strengthen and intensify our focus for the future.

In Q3 of 2009, all of our $105 million of our 2% convertible notes were converted into common stock, and shortly thereafter, in order to take advantage of a then attractive market condition, we successfully completed the issuance of $200 million of our 3% convertible notes.

And finally, despite the tight availability of credit, we increased and closed a committed three-year $100 million revolving credit facility.

With a combination of our strong backlog, continued investment in new technologies, and recent corporate actions we believe that we are extremely well positioned to grow and prosper as the markets eventually regain their strength.

The growth strategy we have honed and that has served us well is essentially unchanged.

First, we will continue to expand our leadership position in the markets we serve by introducing compelling new products.

Secondly, we will continue to broaden our reach to new customers and new applications.

And thirdly, we will continue to identify and pursue acquisitions of technology-driven, market-leading companies to strengthen our existing business and expand our [overall] market reach.

We're also very mindful of the importance of deploying our cash, and will look to do so, as in the past, with an aggressive yet disciplined and patient approach.

Now let me turn the presentation over to Michael, who will provide some financial highlights.

Thanks, Fred.

Good morning, everyone.

Yesterday evening we reported revenues for the fourth quarter of fiscal 2009 of $122 million and diluted EPS of $0.21.

Revenue for fiscal 2009 were $586.4 million and diluted EPS was $1.73.

Our diluted EPS for both Q4 and fiscal 2009 includes a $0.04 EPS charge for previously- announced cost reductions.

Hence, excluding this charge our core business delivered $0.25 of diluted EPS in Q 4 and $1.77 of diluted EPS for the full year.

Before I discuss Q4 results in detail I'd like to address the full year's results first because I think it provides helpful context to Q4 results, as well as the 2010 guidance that Fred will provide later in this call.

Revenues in fiscal 2009 were a record-breaking $586.4 million up 10.3% as compared to fiscal 2008.

The year-over-year increase is primarily attributable to the revenue contribution from the Radyne acquisition, and despite the difficult conditions that existed we were able to achieve year-over-year growth in several of our key legacy product lines.

Except for our Mobile Data Communication segment, which reported fiscal 2009 revenues of $177 million, or 32.2% decline when compared to 2008, our two other business segments performed admirably well given the difficult economic conditions.

Our Telecommunications Transmission segments revenues in fiscal 2009 were $254.3 million, an increase of 21.7%.

We also more than doubled the size of our RF Microwave Amplifier segment, which reported record sales of $155.1 million.

Our consolidated revenue growth would have been significantly higher than the 10.3% revenue growth we achieved had we not experienced a material shift of revenue in our Mobile Data Communications segment from fiscal 2009 to fiscal 2010.

For the year we delivered GAAP diluted EPS for fiscal 2009 of $1.73 as compared to fiscal 2008 at $2.76, down 37.3%.

When comparing these amounts, in addition to the up-and-down changes in our business, our 2009 EPS was negatively impacted by several large items; a cost reduction charge of $0.04, which I previously mentioned; a $0.21 nonrecurring charge related to in-process R&D, which we acquired as part of our Radyne acquisition; and finally, our fiscal-year 2009 diluted EPS was impacted by $0.07 as a result of our decision to issue our 3% convertible notes.

The $0.07 reflects the full dilutive impact of the additional interest expense related to our 3% convertible notes and the incremental shares that were included in both our Q4 and fiscal 2009 diluted EPS calculations.

As Fred stated, when you look at that time year, the second half was clearly negatively impacted by adverse global economic conditions and by the shift of Mobile Data Communications revenue to fiscal 2010.

With that in mind, let me give you some detailed color on the quarter.

During Q4 we generated revenue of $122 million.

Our telecom transmission segment reported $56 million of sales in Q4, which represents a decrease from Q4 of 8.9%.

Although we recorded year-over-year incremental sales as a result of the Radyne acquisition, both our Q4 sales and orders in the segment were suppressed by ongoing difficult economic conditions.

In addition, our Q4 sales reflect a nominal amount of Over-the-Horizon Microwave system product sales.

Operating margins in our telecom transmission segment in Q4 were approximately 16.8% of related sales.

We should point out that our Q4 operating income, and to a lesser extent sales in the segment, were impacted by our decision to sell our video encoder and decoder product lines.

Quarterly sales of these products were the lowest they were all year.

In addition, the telecom transmission segment bore the full brunt of our $2 million cost reduction charge.

Although we originally had higher hopes with these products for fiscal 2010, we made a strategic shift, choosing to redirect investment and effort to product lines where we have clear market leadership positions.

As a result, in August 2009 we announced both the sale of our video encoder and decoder product lines and the shut down of our commercial fiberglass antenna line.

Putting all of this into some perspective, aggregate sales were approximately $10 million for the full fiscal year of 2009 and back in March, our original revenue expectations for these products for fiscal 2010 was about the say.

Nevertheless, we believe our strategic actions will bring better long-term profitable growth to the Company.

As we look to fiscal 2010, revenue for our Telecommunications Transmission segment remains difficult to predict.

We see several bright areas in this segment, which Fred will discuss in detail, but certainly growth in this segment in fiscal 2010 is going to be dependent on what happens with the overall economy and the impact it has on our tangible order flow.

In addition, we believe that 2010 will be the year that we finally begin to generate revenue again from sales of our over-the horizon microwave system products to our Algerian end customer.

Turning to our RF Microwave Amplifier segment we reported sales of $41.9 million, slightly below the record quarterly sales we achieved in Q3.

In addition to the ongoing benefit associated with the acquisition of Radyne, our Q4 sales reflected strong demand for our amplifiers that are used in the CREW 2.1 program.

In fact, sales in Q4 relating to CREW 2.1 were the highest they were all year.

Operating margins in this segment in Q4 were approximately 12% of related sales.

As we look to fiscal 2010 in this segment we do not expect that our RF Microwave Amplifier segment will repeat the record year of revenue that it achieved in fiscal 2009.

We currently expect to record lower revenue in fiscal 2010 related to the CREW program.

In addition, since economic conditions suppressed overall bookings in both Q3 and Q4 of fiscal 2009 and since we currently expect such conditions to last through at least the first half of 2010, we currently believe that the net result will be that our RF Microwave Amplifier sales will be significantly lower in fiscal 2010 versus fiscal 2009.

If economic conditions meaningfully improve, orders and related sales in our RF Microwave Amplifier segment should eventually begin to pick up.

In our Mobile Data Communications segment, our Q4 sales were $24.1 million and were negatively impact by the shift of revenue that we mentioned earlier.

Operating margins in our Mobile Data Communications segment in Q4 were approximately 6%.

Despite the impact of the shift in revenues, Q4 was actually a period of positive developments for our Mobile Data Communications segment.

Despite the negative impact to our operating margins we continued our selling, marketing, research and development efforts relating to our next-generation MTS and BFT product lines.

Additionally, in Q4 our MTS ruggedized computer supplier began making some very nominal shipments.

Although configuration and production-type issues remain and as of today full-scale production is delayed, we believe the supplier is generally on track to begin significant deliveries sometimes during the first half of fiscal 2010.

We currently have approximately $438.2 million of backlog in the segment, of which the substantial portion is for the shipment of these new MTS ruggedized computers or MTS systems that include these computers.

Although difficult to predict, as of today we still believe it possible that meaningful deliveries will be made in the last month of Q1 2010.

If this happens, we believe deliveries will increase as the year progresses, with the fourth quarter of fiscal 2010 anticipated to be the peak quarter for shipments and related sales.

It's important to note that Q1 still remains iffy.

If the supplier is not able to meet our estimated Q1 deliveries our Q1 expected sales and earnings will be materially impacted.

However, any impact we expect will just roll over into the following quarters and we don't believe it will have any impact on our full year.

Fred will provide you additional details on how we are baking this in into our fiscal 2010 revenue and EPS guidance later in this call.

Now let me give you some further color on the rest of the consolidated income statement for Q4.

Our consolidated -- of our fourth quarter sales of $122 million, 30.7% were to international end users, 56.5% were to the US government, with the remaining 12.8% to domestic commercial customers.

Our gross profit in Q4, as expected, was significantly low.

Gross profit as a percentage of sales decreased to 38.5% for the fourth quarter of fiscal 2009 as compared to 45.5% in the fourth quarter of fiscal 2008.

As we mentioned in our prior conference calls, although we achieved significant operating synergies as a result of the Radyne acquisition our gross margins have been significantly impacted in fiscal 2009 as a result of the lower level of production of mobile satellite transceivers and an overall change in product mix associated with the Radyne acquisition.

In addition, during Q4 of 2009 we recorded $2 million cost reduction charge, of which $1.2 million was reflected in cost of sales.

Looking forward, consolidated gross margins in fiscal 2010 will be significantly lower than fiscal 2009 due to the record amount of anticipated shipments of MTS computers, which have lower gross margins than our historical product mix.

On the expense side SG&A expenses were $22.2 million in both the fourth quarter of fiscal 2009 and 2008.

Our SG&A expenses for Q4 of fiscal 2009, when compared to last year, include incremental spending associated with our acquired Radyne product lines.

Also, it reflects incremental professional fees associated with the various legal and other matters described in our 10-K.

As a percentage of consolidated net sales, SG&A expenses were 18.2% in Q4 of fiscal 2009 as compared to 17.6% in Q4 of last year.

R&D expenses were $12 million in the fourth quarter of fiscal 2009 as compared to $10 million in the fourth quarter of fiscal 2008.

R&D as a percentage of net sales was 9.8% in Q4 versus 7.9% last year.

Despite the short-term negative impact that it may have had on our consolidated operating margins, we believe that continued investment in research and development projects will continue to have a long-term payback, thus we will continue our efforts through fiscal 2010.

As Fred will discuss later, we are seeing tangible benefits from our efforts related to the development of our next-generation MTS and BFT products.

Amortization of intangibles with finite lives in the fourth quarter of fiscal 2009 was $2.2 million.

This represents an increase of $1.7 million and is primarily attributable to the Radyne acquisition.

Operating income in the fourth quarter of fiscal 2009 was $10.6 million compared to $24.9 million for the fourth quarter of last year.

As a percentage of net sales, operating income was 8.7% in the fourth quarter of fiscal 2009 versus 19.7% in the fourth quarter of fiscal 2008.

As I mentioned earlier, our Q4 results were impact by our cost reduction charge.

Excluding this charge our operating income in Q4 would have approximated 10.3% of consolidated revenue.

Pretax total stock-based compensation expense, which is recorded through our income statement, was $2.5 million in the fourth quarter of fiscal 2009 compared to $2.8 million in the fourth quarter of fiscal 2008.

Interest expense in the fourth quarter of fiscal 2009 was $1.7 million compared to $668,000 in the fourth quarter of last year.

The increase in interest expense is primarily attributable to the Q4 2009 issuance of our 3% convertible senior notes.

Interest income and other decreased from $2.4 million last year to $431,000 in the fourth quarter of fiscal 2009.

The period-over-period decrease is primarily due to the significantly-lower period-over-period interest rates, as well as our previously-announced change in our investment strategy.

Turning to taxes, our GAAP effective tax rate for fourth quarter of fiscal 2009 was 33.6% compared to 36.3% for the same period last year.

As we look to fiscal 2010 our GAAP effective tax rate is estimated to approximate 36%.

This increase from our final 2009 rate of 35.2% is primarily related to our expected increase in pretax income in fiscal 2010, as well as the expiration of the federal research and experimentation credit on December 31, 2009.

In summary, on the bottom line diluted EPS, again, for the fourth quarter was $0.21.

As I mentioned earlier, it includes a $0.04 EPS charge of the $2 million cost reduction charge and the full dilutive impact of our 3% convertible notes.

Several years ago we began reporting non-GAAP EPS to help those that wanted to better understand the impact of the adoption of FAS 123(R) accounting for stock-based compensation.

In this regard, our non-GAAP EPS was $0.26 in Q4 2009 and compared to $0.67 last year.

Our GAAP -- our non-GAAP EPS excludes stock-based compensation but includes our cost reduction charge.

Thou that stock-based compensation expense is included in our ongoing results and has been in our actual results for a number of years we believe it is less meaningful to report a separate non-GAAP number going forward.

Of course, we will continue to separately break out our amortization of stock-based compensation for those that wish to calculate their own non-GAAP results.

EBITDA, or earnings before interest, taxes, depreciation and amortization, was $18.8 million for the fourth quarter of fiscal 2009 compared to $30.6 million for the fourth quarter fiscal 2008.

On a quarterly basis, given the overall use of this non-GAAP measure throughout our industry, we still expect to report EBITDA.

This quarter we did what we believe to be a solid job as it relates to our balance sheet.

Our working capital requirements significantly declined during the quarter, and during Q4 we generated cash flows from operations of approximately $38.9 million.

For the full year we generated cash from operating activities of $88.5 million compared to $77.8 million for last year.

Including the net proceeds of our 3% convertible notes, as of July 31, 2009, we have approximately $485.5 million of cash and cash equivalents.

Finally, let's turn to consolidated backlog.

Despite the soft bookings we experienced in Q4, as of July 31, 2009, reported backlog was close to a record $549.8 million compared to $201.1 million last year.

We expected a substantial portion of the backlog as of July 31, 2009, will be recognized as sales during fiscal 2010.

Before turning it over to Fred, let me briefly discuss the impact of a new accounting principal, then I will provide an update on legal matters.

On August 1, 2009, we adopted FSB APB 14-1, which changes the historical accounting and reporting related to our 2% convertible notes.

Although these notes are no longer outstanding, sometime during Q1 we will file a Form 8-K with the SEC to reflect a required historical change to our financial statements for fiscal years 2005 through 2009.

The adoption of this new standard has no impact on our historical diluted EPS; rather it requires changes to our historical reporting of interest expense and accounting value of the note.

Most importantly, the adoption of this new principal has absolutely no impact on our new 3% convertible notes because the holders of such notes can only receive stock upon conversion.

As such, our income statement interest expense going forward will include the 3% stated interest expense in our reported interest expense number, as well as the amortization of deferred financing costs.

For those looking for additional details on this topic, you can see our investor presentation posted at www.comtechtel.com, and eventually with the Form 8-K to be filed with the SEC.

Finally, I am very pleased to report significant progress on a variety of legal matters that we have been work through.

First, let me provide with you an update on the DoD subpoena matter.

Since December 2008, we have responded to a DoD sub -- DoD subpoenas issued to us.

In August 2009 we were informed by a representative of the DoD that the DoD had completed its investigation and concluded that any allegations of defective switches were unfounded and that they would not be taking any action on this matter.

As a result, we have concluded our internal investigation and we now consider this matter closed.

Second, let me provide with you an update on our ongoing State Department export compliance review.

As many of you know, since October 2007 we have been performing an internal investigation and assessment in regard to our internal controls as it relates to export-related laws and regulations and laws governing record keeping with foreign representatives.

Earlier this year we hired a third-party export compliance firm to perform an independent export compliance audit to see if the controls we put in place were appropriate and working.

I am pleased to report that our efforts here are continuing to pay off.

The third-party audit was in line with our expectations and no additional violations were found.

As part of its report the third-party compliance firm did make various recommendations that we could make to improve our overall compliance program and we are working to continue to implement such procedures and steps.

Although the timing of these kinds of matters often difficult to predict we are hopeful that the State Department review process will be completed within our fiscal 2010.

Although we have expended a great deal of effort and dollars responding to the State Department on the export matter we are pleased with our progress.

We expect to continue to improve our process through fiscal 2010, as it is an essential component of conducting our business, given the sensitive critical type of products that we supply to our customers.

Now let me turn it back to Fred, who will provide additional color and insight into our three business segments, as well as provide some comments and specific financial guidance for fiscal 2010.

Fred?

Thanks, Mike.

I will begin with our Telecommunications Transmission segment, which includes our satellite earth station and our over-the horizon microwave product lines.

In satellite earth station products, by far the largest product line within the segment, we remain the clear market leader.

We believe that our market-leading modems that incorporate both our forward error correction technology, as well as our double talk carrier-in-carrier technology will continue to drive our long-term growth when the global economy recovers.

In fact, to extend our leadership position, in fiscal 2009 we introduced a more advanced forward error correction feature into our modems, which we call [versa-fec].

It is specifically designed to support latency-sensitive applications, such as in cellular backhaul over satellite, and when combined with our double talk carrier-in-carrier technology, provides our customers with further satellite communications cost savings.

We want to believe the fundamental long-term growth drivers in satellite markets we serve remain convincing.

First, there remains a shortage of satellite transponder availability in high-growth areas, such as Africa and Asia, causing hikes in space segment costs that can only be mitigated by more-efficient modems.

Secondly, the overall long-term demand for satellite transmission continues to grow, driven by several factors, including the cellular subscriber growth in emerging markets, high-definition video, and the enormous bandwidth needs for the US government.

Because of the book-and-ship nature of our satellite earth station product line, our satellite earth station revenues in the short term are subject to quarterly fluctuations.

For instance, despite the strengthening of satellite earth station bookings that occurred in our Q3 of 2009, bookings in Q4 were the lowest they were all year.

However, given the encouraging recent macro economic signs, we believe bookings may now have bottomed out, and as we look forward, we believe Comtech's bookings and revenue growth will be a function of how quickly our customers' end markets recover.

For now, we are taking a cautious approach as we enter fiscal 2010.

If economic conditions significantly and sustainably improve, we would expect to return, at some point.

to the growth levels that we are used to seeing in this product line.

In our Over-the-Horizon Microwave, or troposcatter product line, we continue to work with the US DoD to upgrade the TRC-170 troposcatter terminals.

Given the successful work we performed on the TRC-170 modem upgrade we are confident of our position on this opportunity, as well.

Internationally, we have continued our aggressive pursuit of new opportunities and believe that our expertise and leading technology in troposcatter communications remains a valuable advantage.

With Algeria, our North African end customer, we continue to believe that at least one of the two contract opportunities will finally materialize and generate revenues by sometime during the second half of fiscal 2010.

We're confident because we understand that one of the prime contractors has now signed their contract and we look forward to finally announcing this award of this contract sometime in fiscal 2010.

Now to our Mobile Data Communications segment, as of year end our Mobile Data Communications backlog was over $435 million.

With this unprecedented record backlog we believe that we will generate record revenues in this segment in fiscal 2010 that will far exceed our fiscal 2009 revenues.

Let me now provide a status of -- on our MTS and BFT programs.

I'll begin with MTS.

Our $605.1 million MTS contract, as of July 31, 2001, had only $58.8 million of ceiling availability, and is currently set to expire on July 12, 2010.

In preparing for a recompete, the MTS Program Office in February issued a public request for information, or RFI, to which we responded in March.

Although subject to change, it is our current understanding that the next step is the issuance of an RFP by the end of the calendar year 2009, and an eventual contract award in the first half of calendar year 2010.

We believe this to be a very aggressive timeline, but based on this timeline, and due to the limited ceiling, even with modest delays -- even modest delays may restrict MTS from meeting future fielding requirements.

Based on these facts, and the expected expansion of our war effort in Afghanistan, we would not be surprised if our present contract ceiling is increased and extended.

As you may remember, in 2007 under similar circumstances our previous MTS contract was increased and extended to enable a smooth transition to a new contract.

We feel this has a good chance of happening again.

We believe the US Army remains fully committed to MTS and believe that funding data supports our view.

For those that are asked, our investor presentation available on our website provides further funding details.

All said, we are pleased with our position on MTS and are excited about its future prospects.

Our backlog is at record levels, the program remains very well funded, and our decade of experience providing this vital communication solution we believe puts us in a strong position to win the recompete.

Now to BFT.

Here, too, the funding data continues to suggest the strong commitment to this program.

The FBCB 2 budget, of which BFT is a subset, was increased by 36% to $515 million for fiscal 2010.

While our five-year $216 million current contract expires in December 2011, as of July 31, 2009, there was less than $5 million currently remaining turned contract ceiling.

As you know, in November 2008, the US Army released a market survey in which the Army proposed a two-year contract extension to our contract to December 2013, and a $617 million increase in the value of the contract.

But, because of a number of policy and personnel changes that have been made since November by our customer and our new administration, we've heard many different views on the status, size, and details of that proposal.

At this time, we have not been officially informed on whether or when this proposal will be acted upon.

We believe strongly that there will need to be some action related to our current contract sooner rather than later.

As far as our next generation BFT initiative, if you remember, the US Army issued an RFI, or request for information survey, in April 2009, contemplating the issuance of multiple $477 million IDIQ contracts to fund the purchase of approximately 100,000 next-generation, high-capacity BFT transceivers over a five-year period starting in 2010.

Our role as a lead competitor and key vendor for this next-generation network and satellite transceivers was, we believe, cemented when we won a $8 million contract in April to deliver our next-generation, high-capacity network and our high-capacity BFT-HC satellite transceivers for the US Army.

Our breakthrough high-capacity transceiver and network products offer significantly enhanced functions and features, many of which far exceed the initial requirements put forth by the BFT program.

And I'm pleased to say that the product capabilities and features we communicated to the US Army many months ago are being fully validated in the build and test activities that are currently underway.

As for as the next steps, it is our understanding that the BFT Program Office will release and updated SOW, or statement of work, to be followed by a formal RFP, or request for proposal, by the end of this calendar year.

It is our estimation that a new contract award could occur sometime late in the first half of calendar year 2010.

I'm highly confident that Comtech has developed the most advanced, most reliable next-generation BFT solution.

I also believe that our competitive position is materially enhanced by our unique ability to provide backward compatibility to existing transceivers at current and newer transmission speeds, thereby allowing methodical and nondisruptive rollout of new systems.

In summary, both MTS and BFT remain vital programs within the US Army communications infrastructure.

As in the past, we believe there will be lumpiness and limited visibility, but we continue to be very pleased with our performance under these programs.

And, finally, let me discuss our RF Microwave Amplifier segment.

Here we continue to design and deliver jamming amplifiers and solid state switches for the CREW 2.1 program, a high-profile and critical US Army program whose goal is to protect our soldiers from IEDs, or improvised explosive devices.

We're also working on amplifier developments for CREW 3.2 and CREW 3.3, which are the next-generation jammer practices.

Additionally, we are working with a US prime to compete for a new Air Force airborne electronic attack program that requires a broad range of frequencies and are also teamed with the same prime in competition to win an advanced airborne radar signals jammer for the US Navy.

We're also working with another US prime on a large airborne jammer program opportunity where the customer is seeking to replace traveling wave tubes with solid state amplifiers.

Our expertise in gallium nitride devices provides an optimum solution for many jammer applications and is one of the reasons we're being selected by many prime contractors.

The Radyne acquisition clearly benefited our RF Microwave Amplifier segment, and we expect we will continue to see the benefits for many years to come.

The traveling wave tube amplifier technology and products we acquired are critical in many US military high=frequency programs, and we believe this area of the business will continue to remain strong.

Opportunities include the beginning of a low-rate production on a new high-powered airborne satellite program, where the government seeks to place satellite links on most US strategic assets.

This application is to communicate with the AEHF satellite, or advanced extremely high frequency, which is a next-generation government satellite program.

We also believe we will continue to see order activity from several government ground-based legacy satellite programs that we have been on that operate in the triband and KA band frequency bands, such as GMT, or ground multi terminal, which is a major triband and KA band ground-based satellite program.

Another area is the buildout of the KA band frequency to supplement the existing triband CX and KU frequency capacity with KA band, using the government's new WGS, or wideband global Satcom satellite.

The WGS satellite is expected to expand capacity in areas of the world where existing commercial and military channels have reached their bandwidth limitations.

On the commercial side, however, sales and bookings in this segment through at least the first half of fiscal 2010 are expected to remain suppressed by the continuing difficult economic conditions.

In summary, our solid state and TWT amplifier product lines both continue to broaden and improve.

We are known and -- we are a known and respected supplier in the markets we address, and we continue to expand our customer base and products based upon innovative technology and a strong quality reputation.

Let me turn to guidance.

As I have stated many times in the past, our guidance concerning future revenue and EPS is subject, obviously, to a number of factors, many of which are, as you've seen, entirely beyond our control.

These factors include but are not limited to, one, the timing of bookings and related revenues on large contracts, such as MTS, BFT, CREW 2-1, as well as large opportunities in our Over-the-Horizon Microwave and other commercial and government markets.

Two, the uncertainty, particular in today's economic environment, of potential US and foreign government budget constraints.

And three, economic conditions in general, particularly in the current uncertain commercial economic environment in which we are operating.

That said, I'm pleased to provide our fiscal 2010 guidance as follows.

Despite lingering difficult economic conditions, based on the strength of our backlog and our market leadership position, we expect record fiscal 2010 revenues in the range of $820 million to $840 million.

The midpoint of this guidance represents an increase of approximately 42% compared to our fiscal 2009.

It also represents a significant increase as compared to our original 15% revenue growth target that we first provided in March 2009.

For diluted GAAP EPS, we expect a range of $2.10 to $2.20, and the midpoint of this range implies an increase of approximately 24% over fiscal 2009.

This, too, represents a significant increase as compared to our 15% growth target we provided in March 2009.

And as a reminder, our 15% EPS target that we provided in March did not include the dilutive impact of our May 2009 decision to issue our 3% convertible notes.

Although we don't normally provide quarterly EPS guidance, we can tell that you we expect our EPS to be significantly back-end loaded, based primarily on our estimate of delivery schedule relating to the MTS backlog.

From a starting point we expect our Q1 2010 revenue and diluted EPS to be similar to our GAAP Q4 results.

As Mike stated, Q1 still remains iffy, and this is based on our MTS computer supplier making delivery schedules, including some in Q1, in accordance with our estimated time line, but we are highly confident that for the year almost all of our MTS backlog will be recorded as revenue.

With that said, let me turn to the question-and-answer part of our conference call.

Operator, we'll take questions now.

Certainly.

(Operator Instructions).

We'll take our first question from Rich Valera from Needham & Company.

Thank you, bood morning.

Question on your implied guidance for your Mobile Data business.

Obviously you do have a very large backlog entering there, but your overall guidance would seem to imply that you'd have some incremental turns business in there, as well.

Can you talk about what you're expecting in terms of any new MTS or BFT transceiver awards in fiscal 2010 to make your overall guidance?

I think we're not expecting much more than the additional satellite airtime at this point.

If you recall, our BFT contract that we got the airtime we have is only valid through March, so clearly the government's going to be needing airtime in April, May, June, and July to continue to run the system, and then throughout the year at this point we're really just waiting for the outcome of the contract ceiling increase given the fact that they really can't order anything, including the satellite airtime.

We expect that to happen during the year, and we would expect them to place at least an order for the airtime.

So there's lots of room for up side, but at this point we just need that contract ceiling increase to occur and we just need to see tangible order flow.

Great.

And then --

Simply, Rich, just to add the final punch line, we're in a position right now where both the MTS and BFT contracts are topped out, as I mentioned.

And so, really what we're doing is on a conservative basis, as Mike mentioned, which is going with the satellite time, which we believe the Army must increase and should happen shortly.

We're really not counting on any of additional orders until we see some action on the increases in the ceiling or extensions of our contracts.

Great.

And then in the past, specifically with respect to the next-generation BFT, you've suggested you thought it would be impractical to duel source that program to the what would ultimately be incompatible transceiver technologies.

Just looking at the language in your 10-K, seems to be suggesting strong preference by the DoD to, in fact, dual source both the BFT and the MTS.

Has your position changed on what you think the likely outcome is there with respect to whether that will ultimately be a dual or single-source contract?

As you know, the original survey that was put out did state that at least the BFT was intending to put out dual $477 million contracts.

We really believe that that's impractical, yes.

We feel that in the end there will be one winner and one contract, so we strongly feel that with our advantage we will be the eventual winner of that situation and there will only be one contract.

Great.

And just one follow-up on that same related risk.

You mentioned a risk of the DoD potentially unbundling some of the third-party components, as well as the airtime, which you currently provide, which is a significant component of the revenue, obviously.

Any incremental color on that?

Anything that's caused you to put that risk into your K, or has anything changed there?

Nothing's changed.

This is something that the Army has been talking about for a number of years now, unbundling, specifically the MTS, unbundling in a similar fashion that BFT has done.

As you know, in BFT we supply just the transceiver and the satellite time and the network, which is our -- which consists of our earth stations.

MTS we supply the total system from end to end.

Obviously, MTS could make a decision to do the same as the BFT guys, and that is to buy their computers separately, even buy some of the, let's say, field service represent -- representation that we supply right now separately.

So this is what we mean.

These are things that the Army has talked about, but has not -- certainly not implemented it to date.

Okay, that's helpful.

Thank you.

And we'll take our next question from Mark Jordan from Noble Financial.

Good morning, gentlemen.

First of all, talking about your telecom transmission guidance, you've talked about being slightly down year over year, also mentioned that you are assuming some tropo Algerian revenue.

Could you tell us the magnitude of that assumption, is this nominal, and how much upside could occur there relative from either Algeria and/or are you assuming anything from the US Army for any meaningful upgrade activity?

Yes, Mark, the way I would tell to you think about it, right now we're so early in the year and we don't have the signed contract from our Algerian customer, at this point you could take it away from either side, the satellite earth station side of our product line.

There's up side there.

If we get the contract on our Over-the-Horizon earlier in the year there's going to be up side there.

At this point we are taking a conservative approach by assuming it's going to -- both of those events occur in the latter part of our fiscal 2010.

And without putting any specific dollars on it, if those things occur earlier, the rebound of the economy and the order earlier in the year, that could be up side, but they are assumed in our assumption really in Q3 and most of it in Q4.

Okay.

In the Blue Force Tracking comments you state that the original market survey talked about the DoD owning the technology, et cetera, the implication there is that they could, I guess, potentially give that to other manufacturers.

What is your understanding as to that technology -- potential technology transfer as part of this next-generation contract?

I think, Mark, the BFT Program Office has always wanted to own the technology, and that was one of the main reasons we originally did not bid on the development contract, because we didn't want to put ourselves in that position.

We are still trying to maintain that position, and BFT is trying to maintain their position.

We have not seen, obviously, the final RFP, so we don't know what exactly the Army will request, but at this point, I think our position is we would rather not sell our IP but if necessary we can work it out.

Okay.

Two quick questions.

One, you mentioned in the 10-K that you're seeing Qualcomm and Lockheed Martin as potential competitors in BFT.

Are they -- have they meaningfully developed and shown them product?

Could you scale their competitive threat?

Secondly, relative to the MTS, the old computers, you have $5.1 million on your books.

You did significantly increase your obsolete inventory reserve up to a little over $11 million, do you feel you're fully reserved therefore for any eventuality on that point?

Let's see, the first part of the question was -- could you repeat that one again, Mark?

Yes, yes.

How serious is the competition between Qualcomm and Lockheed Martin that you mentioned in your K in terms of having developed product in the BFT area?

Okay.

As you know, any time a program -- both of these programs have grown to over $1 billion over the last few years of revenue for us, obviously going forward revenue is going to increase, they're very well funded and so forth.

And the RFIs elicited some real interest by some very large system integrators, such as, you mentioned, Lockheed and others and so forth.

Yes, the interest is there, obviously.

Product wise I think we're all aware only of our and ViaSat's ability to provide the transceiver.

So I think for MTS we are probably the only one that can provide the present format of the transceiver and we are being solicited by some of the primes that show interest in it and we have been for the past few months.

So I think we will be involved with our own bids and as well as some of our competitors.

On the BFT side, I think truly for our part we're only talking about the transceiver and the satellite and the network, and I think that's really just between two competitors.

Now, there may be some competition, I think, that will start to generate with BFT on the system prime basis.

Northrop Grumman is today's prime contractor that BFT is using.

I believe that there will he be many of the other, the Lockheeds, the GEs and so forth, that will be vying for that contract, as well, so I think that's what you're probably seeing.

I think on our part, it's really between just us and ViaSat.

On the inventory that you mentioned, yes, we had some residual inventory that we have remaining because of the switch by the Army to the new computer, but we've already sold half that inventory to other customers and we believe that'll be sold in the next -- certainly within the next 12 months.

Thank you.

And we'll take our next question from Tim Quillin from Stephens, Inc.

Good morning.

You talked about the backlog in the Mobile Data segment in the 10-K, could you provide the backlog for the other two segments?

Sure, Tim.

The backlog as of Q4 00 and I'll give you the whole thing -- our Mobile Datacom is $438.2 million, our RF Amplifier segment is $63.9 million, and our Telecom Transmission is $47.7 million.

Okay, great.

So as you mentioned in the comments, the Telecom Transmission bookings were light in the fourth quarter, and presumably you're looking for a pickup in that order flow to get to you your guidance for fiscal '10.

Are you starting to see any positive indicators in the current quarter in terms of bookings, especially in the international satellite earth station business?

I think, as I mentioned, we feel that we -- we've probably bottomed out in that area and we do see some pickup in the present timeframe, but I caution you and ourselves in terms of one month does not make a trend, so we're just being very conservative.

Right, I guess we've seen some head fakes out there?

Yes.

In terms of the MTS business I understand the uncertainty on the timing of the computer shipments, how are you thinking about the timing of transceiver shipments that are already in backlog -- or full systems that are already in backlog right now?

Well, unfortunately, the transceiver shipments are part of a system that includes the new computer --

Right.

-- so they, too, suffer from the delays.

Tim, it's really going to be second-half loaded the year.

The first batch of computers are not probably going to go with these systems.

They'll be starting the upgrade process.

So at this particular point in time very tough for us to figure on exactly when, but our timetable here is that it really is going to be second-half loaded.

Okay.

And then the transceiver shipments, though, could start shipping concurrently once you get to full production on the computer shipments?

Yes.

Okay.

And moving on to the amplifier business, can you define significantly lower?

Not really.

(LAUGHTER) I think, obviously, if you look at the backlog as of Q4 that gives you a sense for what the starting point is for fiscal 2010.

Our TWTA and solid state business that we acquired from Radyne, there is a book-to-ship nature of that that occurs throughout the year.

There's a number of programs that we're working on the military side, but at this particular point, without really knowing where the economy is going to be, it's difficult for us to place a precise number on this.

I think when we look at it under a variety of ways, both with our Telecom Transmission and our RF Amplifier segment, the up and downs that could occur in both of those segments, given the fact that we have such strong Mobile Datacom backlog, depend on what happens, we still feel comfortable with the $820 million to $840 million of consolidated revenue.

But at this point we really don't have a precise number on really any of those two segments in our numbers.

We have a multiple different scenarios, and I think the the only thing we're feeling comfortable to saying at this point is it's going to be significantly down year over year at this point.

And as the year progress we'll get a sense of how far that down is, or if the economy comes back it will be closer to the '09 number.

It's the best we could do for you now.

I think, just to add something, Tim, our RF Amplifier segment just had a record, record year in '09, both in the traveling wave tube amplifier area, which we acquired from Radyne, and our own power system technology area.

And as typically happens in these type of situations, when you get an overshoot of business, there is a digestion period and I think that's what we're really experiencing right now.

It isn't being helped by the economy the way it is right now, either.

So between the economy and the overshoot on our business posture in '09, I think there's going to be a digestion period, which will reduce our revenues for 10.

Hopefully not significantly, as Michael has said, but a lot of it depends on the programs that we have in the pipeline.

Okay, fair enough.

And I just have two other questions, if I may.

One is, is there any right sizing you need to do in your Phoenix operations just given the uncertain level, I think especially in the satellite earth station business?

And the second question is if you could talk about the acquisition pipeline and what you're seeing out there?

Thank you.

As far as the right sizing, I think our comment is that we do that as a normal course of business, and obviously with the economic conditions the way they are, we have, and I believe we've stated that we've done some cost cutting and reductions of personnel and so forth.

So yes, the answer is we react pretty quickly to the condition that we're in.

In terms of acquisitions, I think we really don't have too much to report.

We have a list of targets, we're studying them, we're talking to a number of people.

Obviously we're very, very interested and we certainly hope to pull the trigger during fiscal 2010.

Thank you.

And we'll take our next question from Jim McIlree from Collins Stewart, LLC.

Thank you, good morning.

Good morning.

Can you frame what you think the operating margin as a percent of revenue for the Mobile Data business will be in fiscal '10, either as a range or generally speaking how it compares to fiscal '09?

Sure.

I think it's probably best for us to think about the whole Company at this point, given the different aspects of the business and the impact on timing of shipments, but certainly any particular quarter if we don't ship a lot of these computers it'll impact what we can absorb in overhead.

And if you remember some of the Mobile Datacom is impacted by -- or our Telecom Transmission is impacted by what goes through our mobile data facility.

I think if you look at Q4 as a starting point for operating margins in total, we did about 8.7%, including the $2 million charge, as a Company, and as these computers start to ship out those computers have significantly lower gross margins than our historical product mix, so overall margins are going to be down.

That being said, we do expect a rebound in sales later in the year, so when we look at that year, I think it's fair for you guys to assume that our operating margins for fiscal 2010, as compared to our GAAP fiscal 2009 operating margin, is pretty similar, if not slightly above what we did for fiscal 2009.

And you can bake in what you assume for the quarter, but given the amount of low-margin computers relative to '09 that are going to hit our P&L, we're not going to see an improvement in our operating margins in consolidation.

Okay.

That com -- the ruggedized computer shipment schedule I think you said hopefully starts in the last month of this quarter.

Would that have most of them shipped in the January quarter, or the April quarter, or is that linear throughout the fiscal year?

It will have a sort of a staircasesque throughout the year.

At this point, given the lateness of the ramp-up, we're being a little conservative in terms of the ultimate ramp-up, so we do expect our Q4 to be the peak quarter of sales at this point, both for the computers, as well as our transceivers.

But as the year progresses we'll see what happens and we'll update accordingly.

Okay.

And I just wanted to make sure that I understood you correctly.

Even though the ceilings for the MTS and the Blue Force Tracking contracts are in sight you're not assuming that the Army takes action on either one of those in your guidance?

In your commentary you made it sound like it's likely they will, but in your guidance you're not going to do that until you see the whites of their eyes?

No, that would not be correct as it relates to our BFT contract.

We are assuming the ceiling increase because we are assuming the incremental revenue, certainly related to the satellite airtime, which if you look at the contracts I think it's less than $5 million or something like that that they could place, so we are assuming in our guidance that that contract ceiling, certainly on the BFT, gets increased.

But only to the extent of that airtime, or are you also assuming some transceivers in that?

We're not assuming much other equipment.

We not -- we don't have a specific assumption on what the contract ceiling would be increased, but we just know it has to be at least the amount of the satellite airtime that they need.

Right, right.

Okay, great.

And then just finally on the CREW revenues, I just want to make sure I understand that, also.

You're not assuming that there's -- what are you assuming on CREW, that there's nothing in fiscal '10, or that it's positive but lower than fiscal '09?

It's the latter one.

We certainly after good amount of revenue in our 2010 guidance, but it is significantly lower.

As Fred mentioned, just '09 was a record-breaking year.

In fact, Q4 was the highest sales for CREW, as they were all year, so we just see a drop-off of that.

Could we get surprised with additional order flow related to the current CREW or even the next-generation CREW?

Yes, but certainly that would be up side to our numbers and it would have to be significant.

Okay, great.

That's it for me, and, once again, impressive results, thank you.

Thanks.

Thank you.

And our next question comes from Chris Quilty from Raymond James.

Good morning, gentlemen.

Believe it or not I have three more questions for you on the BFT program.

First on the airtime, I know your last airtime contract was about $26 million for nine months, I think, so is it fair to assume a $30 million to $35 million annualized contract is what would you expect on airtime?

I don't -- at the top of my head, Chris, I don't recall that number.

I think our press release talked about a $40-some-odd million number back in a couple months ago, and that ran out through March of '10, so I think it's a little bit higher than that.

Okay.

And second question on the timing of when you expect the final contract award for BFT, I had thought previously we might expect in this the early part of 2010.

ViaSat has been talking more about late 2009, and now I think you said in the call late 2010.

Where do we get some sort of confidence on where that actual award date might be?

Unfortunately, Chris, we're all in the dark -- ourselves, ViaSat and everybody else -- because of the recompete nature of it the Program Office is pretty well shut down in terms of providing information to anybody.

As best as we estimate and with some unofficial words, we don't think that the RFP will come out before the end of the calendar year as you can see how late and how difficult it is for the Army to even grant our extension and increase in the ceiling price.

So that hasn't happened, and that was, what, November of '08, which is almost a year ago -- ten months ago.

So things don't flow as quickly as the Army wishes.

But having said that, our best guess is, as I think is what I mentioned, that I think there will be an RFP in the end of the calendar year, and they could turn it around.

We feel that that program can turn it around.

Especially with all the testing that's been going on on our transceivers and so forth, they could turn this around certainly in the first half of the year.

Now, it could even slip.

Okay, now that I have that clarity.

Yes.

(LAUGHTER)

The final question here on BFT, the issue of the government now mandating technology rights -- again we'll see where that goes -- but end of the day, were you forced to surrender manufacturing rights to a third-party manufacturer there really is no way for them to dictate what technology licensing you might require from that third party, correct?

You've spent $26 million, how much ever, on bid proposal, G&A, developing the technology, you could, I would presume, charge that company some amount per terminal?

Yes, I think there's a number of ways that I think we can attack that situation.

Right now our position is we don't want to give up our IP, and the Army's position in the past has been they want the IP.

But we have not seen the RFP, so we don't know exactly what the Army will ask for, number one.

We don't know what our competition will go for, either.

So I think, as I tried to kind of be cute about it, I think -- and I'll mention it again, we feel we have a number of ways that we can work it out.

Okay.

On the Telecom weakness or the order weakness that you saw in the fourth quarter, was that specific to the commercial or the military side?

It's really both.

It's really both, but probably heavy other than the commercial side.

Okay.

And regarding the $282 million MTS order, two question.

Can you give us a general sense?

You talk about significant amount of that order shipping in fiscal '10, does that mean half of it, 75%, potentially 100% of the order shipping?

We would like to see all of it shipped in fiscal 2010.

As you know, our contract today expires on July 12th so all those shipments should occur before July 12th.

Now, having said that, we are at that time mercy of our supplier and things can change, but right now we're anticipating most of that shipment by July 12th.

That's all in our guidance.

Okay.

And -- yes, but you used a lawyerly word, I was looking for a number.

Well, we did ship some -- on a good note we did ship some in fiscal 2009, during Q4, and I think, as Fred said, the contract is July 12th, so if our contract gets extended and there's another month lagover going to fiscal 2010 I don't think that would materially change the way we would view the year.

But I think from a guidance perspective we're certainly expecting the 281 to be fully complete by 7/31/10, and if there is a delay, like Fred said could, could something slip into fiscal 2011?

Absolutely.

At this point we don't see that based on the desires of the customer and where we think the supplier is going to be in terms of ramping up full production.

Got it.

And just for some clarity, as that unit ships you've clearly stated that there are significantly lower margins than the traditional business, but could you perhaps narrow us down to range from traditional mid sometimes up to high 20% EBIT margins you were seeing with the old product you're now, in the last couple quarters, have seen margins down mid single digit.

Is it fair to assume that as that ships in volume it's more mid single or high single digit?

I think, given the competitive nature of the MTS and BFT recompetes, we're going to stay away from providing specific numbers.

Obviously when we report our actuals you'll get a sense for what happened in terms of what shipped, but I still would tell you, if you go and you think about our three segments and you think about the GAAP '09 operating margin in aggregate you'll come up with a number that in aggregate will make some sense to you.

But at this point we don't want to provide any specific numbers.

Okay, and final question here.

I think last year, or in the prior couple years, you saw some benefit as MRAPs were aggressively shipped out to Iraq, and all, or a good portion of them, had a BFT solution attached.

Is it reasonable to assume that as they're now ramping up production of about 5,000 of these MATVs out to Afghanistan that you might likewise pick up some incremental unit orders or do you think instead they're going to just swap units off of existing vehicles?

I think our present view right now, Chris, is that we will benefit both in the CREW program and the BFT program with new units.

Okay.

Great, thank you, gentlemen.

Thanks.

And our next question comes from Tyler Hojo from Sidoti & Company.

Hey, bood morning, everyone.

Quick question just on cash flow expectations for fiscal 2010.

Maybe if you have an expectation from cash from Ops and CapEx?

Given that everything is back-end loaded in terms of our revenue and so forth like that it's going to really be dependent on if revenue comes in early.

I think -- from a safe perspective I think we'd be looking at at least $550-ish million of cash.

Certainly if things get better earlier in the year that number would increase, I think, significantly, but the way we're modeling it at this point I think we'd assume to have a pretty heavy balance at the end of the year.

[Surely a lot of that] cash will come in '11, so conservatively $540 million, $550 million is probably a good target but I think that number would go up if things come in earlier and a little bit better than what we expect.

Okay, and how about on the CapEx front?

The Cap expenses, we've done the Radyne integration, we're significantly completed with our current buildout of our Arizona facility, so at this point we are actually expecting a significant drop in our Cap expense and I think we're about $14 million, $15 million for fiscal 2010.

There's an exact number in the 10-K that we put, but that's sort of what we see in terms of the business needs for fiscal 2010.

Oh, great.

Then I just wanted to dig in a little bit more.

Someone asked question about acquisition pipelines and so on and so forth, but maybe if you could help us think of what your anticipation is with, call it $550 million in cash by the end of the year.

Are you looking at bigger deals, or should we be thinking of the strategy four or five years ago where you looked to pick off smaller product lines and build out the business that way?

I think the answer is both.

We certainly are always interested in good technology product lines, or the small companies that can provide some technology and growth, especially in our sphere, and we're certainly looking at -- size wise at companies Radyne style or higher.

Fair enough.

And just lastly on telco, I think there's been some dialogue here just in regards to new business wins, and I guess there's a little bit of a mix between economic pickup and something happening on the Over-the-Horizon front, but historically, what has your lead time been from winning business with, say Algeria, and actually delivering on those orders?

Well, two answers there.

On our large programs, it's extremely difficult to really pin down the customer and when he places that contract, and we specifically are also at the mercy of prime contractors in those areas, so we have a double-jeopardy situation where we depend upon not only our subcon -- prime contractor, but also the end user.

And as you know, certainly in Algeria, we've been wrong for a number of years and the timing of it, and our confidence today really is that at least we know that one of the contracts our prime contractor has signed, and we're actually beginning negotiations with them.

So that gives us confidence that in a number of months we should be able to say something about that contract.

Would you --

On -- I'm sorry, go ahead.

Would you be able to maybe talk about the magnitude of the contract that you're currently negotiating, or over what kind of timeframe it's covering?

I think the timeframe we can probably easily tell you, and that's -- usually it's about a three-year timeframe.

Magnitude-wise, it really varies.

It could be $20 million, it could be $70 million.

It's a difficult area to predict, depending upon what our prime finally negotiates.

I see, helpful.

Thank you very much.

(Operator Instructions).

And we'll take our next question from Marc Balcer of Bluefin Investment.

Thanks.

Turns out I'm French now.

So I think --

(LAUGHTER) Is that good or bad?

Either way.

You mentioned the Blue Force Tracking and right now the next generation is mostly about transceivers for you.

Do you have capabilities to prime that program theoretically, or would you have to have something else if you were interested on bidding on the entire program?

Which program are we talking about?

The program that's currently Northrop's.

Oh, the BFT.

No, we -- let's put in the way.

I think -- depending upon what the RFP will turn out to be, I think the answer could be, yes, we could compete for that.

We certainly do have the capability, because we're providing similar service to the MTS program.

So, yes, we could actually compete with Northrop Grumman on that area.

Great, thank you.

Okay.

We'll take our next question from Michael Ciarmoli from Boenning & Scattergood.

Hey, guys, good morning, thanks for taking my call.

Just to follow up on the RF amplifiers and specifically the CREW 2.1, can you give us a breakout of how much CREW accounted for total revenues in fiscal '09?

Not really, except I can refer to you a couple of comments we made in the past where if you remove the impact of the Radyne acquisition the year-over-year growth that occurred in our legacy business was mostly CREW, so it's certainly probably was north of $20 million or so would be the number, but we don't have a precise number here.

Okay.

But it's certainly of magnitude that when we look at '09 we're going to see a big drop off in that number.

I'm just trying to understand that drop off.

Have you already started receiving the orders and fulfilling the demand for the MRAP.ATV vehicles?

I guess there's firm orders out there so far for 4,000.

It looks like there's going to be a 5,000 number, and looking at the government-furnished equipment list as to what goes on those vehicles every one's going to have a CREW 2.1 jammer.

I'm just trying to reconcile that ramp and why you guys think that there's going to be a fall-off?

We just don't have visibility as to where the trucks and the units actually go, so we ship them to the prime of where they tell to us go and it goes on which vehicle, but unfortunately, being the sub on both the CREW contract and others, we just don't have visibility to really answer your question.

Okay.

So is it fair to say that you just haven't received a lot of the orders to support what looks like there's going to be 5,000 vehicles?

I think, depending upon what our customer decides, whether it's the CREW 2.1, which we have been supplying, and as I mentioned, there are developments going on of CREW 3.1 and 3.2.

The customer, I think, could decide to go forward with the new developments or go with the present systems.

That has not yet been decided.

Okay.

Okay, that's helpful.

And then just on the competitive front, Iridium, which I think actually started trading today, they've been talking in their presentations about trying to get a piece of Blue Force Tracking, are you guys seeing them out there in the space at all as a competitive threat, vying for any of this business, whether it's network operations, satellite airtime?

I think -- Iridium and others, I think everybody recognizes that the BFT program is a very successful and ongoing and well-funded program, so I think you're going to see Iridium, you're going to see Global Star, you're going to see other satellite competitors coming into the fold.

Okay.

Okay, fair enough.

And then just the last question as it relates to Telecommunication Transmission revenues.

The segments obviously struggled, especially more on the satellite air station.

If I look at Applied Signal, their royalty payments have continued to go up.

What's the -- can you help me understand the relationship as to why they're seeing increased royalties and yet you guys are seeing a fall-off in revenues, if could you help me understand that relationship?

Yes, I think it's simply this.

More and more of our modems have the carrier-in-carrier capability installed in it, so even though our sales may be -- may have declined in a quarter their royalties may have actually increased.

Okay, that's helpful.

Great, guys, thanks a lot.

Okay, thanks.

And it does appear we have no further questions at this time.

Okay, thank you very much for joining us today and we look forward to speaking with you again in a few months.

Thanks very much.