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Savings Experiment: Snow RemovalWith former Miami Dolphins coach Don Shula, re-visiting the New England Patriots spying scandal and bringing up the issue whether an asterisk should be added if they successfully run the table and go undefeated, I found it interesting that a very successful Israeli defense company's subsidiary was also found guilty of espionage.The Patriots were guilty of spying against the NY Jets and having seen the Jets play, I can't imagine that the spying made any difference whatsoever. The same can't be said of Elbit Systems (NASDAQ: ESLT) subsidiary Kollsman Inc.
Kollsman Inc., was found guilty of misappropriation of trade secrets relating to commercial air data computers. The jury ruled in favor of the plaintiff Innovative Solutions & Support Inc. (NASDAQ: ISSC) and found that IS&S had suffered damages of just over $4.4 million in lost profits and $1.6 million in defendants' net profits, for a total of over $6 million. The verdict also opens up the possibility of imposition of exemplary damages and other costs against the defendants based on willful conduct.
Unlike the Patriots, Elbit Systems they won't have to forfeit a first round draft pick, though they will have to cough up cash. While the news is unfavorable, I don't think this will slow down Elbit's strong business. Elbit Systems manufactures integrated communication networks, sells helmet mounted systems, unmanned air vehicles, and electronic warfare and signal intelligence systems. They continue to sign deal after deal and the business looks good. Commenting on last quarter's earnings President and CEO, Joseph Ackerman said, "We are pleased to report another quarter of growth that is highlighted by record backlog and cash flow. I would like to underline our organic growth that amounted to more than 20% and made a substantial contribution to our overall growth of 36% following the acquisition of Tadiran."
With Q3 earnings due out this coming week, all indications are for continued strong growth.
With the war in Iraq far from over and things with Iran heating up, Elbit Systems looks like a good play in the defense sector.
Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. Writer is long ESLT. He has no other position in any stock mentioned as of 11/9/07.
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