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The View From Comtech
Year In Review
Based on market indicators, we see the satellite industry continuing to rebound, with growth in the ground equipment sector. Broadcast continues to account for a majority of transponder usage. But, new customer applications and developing regions of the world are starting to have a significant impact on satellite demand. The requirement for additional value continues to be paramount in many markets. Customers are seeking solutions that enable them to lower their total cost of ownership and reduce space segment costs.

At our core, Comtech is a technology company focused on innovation and technology leadership. Our decision to invest in new satellite earth station products and technologies is founded upon what we believe are compelling growth catalysts in the global satellite communications market.

With the addition of millions of broadband and wireless subscribers across the globe every year, and the increase in bandwidth-intensive applications, the amount of network traffic being transmitted is increasing exponentially. With much of this growth arriving from emerging markets, where terrestrial capacity is often unavailable, unreliable and costly service providers often rely on satellite as the preferred transmission medium.

Paralleling the market’s requirements, Comtech EF Data’s product development has focused on delivering technologies and solutions to enable rapid return on investment to be realized. To name a few benefits, our technologies provide link efficiencies, superior performance, flexibility and on-demand bandwidth. We expect to continue to expand our leadership position by offering new products and solutions to meet the demand of our commercial, government and defense customers.

The focus for Comtech EF Data in 2007 was on delivering satellite bandwidth efficiencies. In February, we were awarded the esteemed “Teleport Technology of the Year” by the World Teleport Association (WTA) for our DoubleTalk™ Carrier-in-Carrier® technology. A unanimous selection by WTA's Technology of the Year committee, DoubleTalk Carrier-in-Carrier by Comtech EF Data was cited for its ability to reduce bandwidth requirements by 50 percent nominally, while maintaining equivalent throughput and performance.

Figure 1 shows the typical full-duplex satellite link, where the two carriers are adjacent to each other. Figure 2 shows the typical DoubleTalk Carrier-in-Carrier operation, where the two carriers are overlapping, thus sharing the same spectrum.

The technology allows for both sides of a duplex link to be transmitted concurrently in the same segment of transponder bandwidth. Such is of critical importance to teleport operators seeking to drive down costs and gain efficiencies as they serve customers.

We acquired the assets and product lines of Digicast Networks, Inc., a Maryland-based company that designs high quality Encapsulators and Receivers. On the acquisition, Daniel Enns, Senior Vice President of Strategic Marketing and Business Development, stated, “The combined solution of the Digicast Products and Comtech EF Data’s bandwidth-efficient modems will enable service providers delivering IP-based broadcast connectivity to minimize operating expenses."

Relative to supporting the U.S. government’s future communication systems, Comtech EF Data made strategic announcements. We completed operational testing in conjunction with L-3 Communications NARDA Satellite Networks (NSN) and XTAR, LLC. The testing was conducted at the Joint Interoperability Test Command (JITC) in Indian Head, Maryland. The testing encompassed Comtech EF Data’s SLM-5650 Satellite Modem, L-3 Communications’ (NSN) Ground Multi-band Terminal (GMT) System and 3.9 Meter Transit-Case Quad-Band Antenna used by the armed forces, and XTAR, LLC’s high power X-band satellite system.

The SLM-5650 Satellite Modem operated effectively at 155 Mbps with 7/8 rate Turbo Product Coding forward error correction and 8-PSK modulation over XTAR’s XTAR-LANT satellite, located at 30° West, utilizing both 2.4 and 3.9 meter antennas. These operational tests confirmed the SLM-5650’s ability to support high data rate applications in a variety of military environments, including fixed, at-the-pause and on-the-move.

The U.S. Air Force awarded us a $5.3 million development contract for the High Data Rate Radio Frequency (HDR-RF) Ground Modem. The HDR-RF Ground Modem will provide high data rate capabilities on next generation Wideband Global Satcom (WGS) satellites. The modem will support future intelligence, surveillance and reconnaissance applications as well as disseminate large quantities of strategic and mission-critical information. The HDR-RF Ground Modem is expected to be an important component of future high-speed satellite communications on the Government's Global Information Grid (GIG) network.
Use of the HDR-RF Ground Modem to provide satellite connections within the GIG will provide users with a seamless, secure and interconnected information environment, meeting needs of both the warfighter and the business user.

As the year progressed, we continued with strategic announcements applicable to both the government and commercial sectors—new products, the award of key contracts and customer testimonials of those using our bandwidth-efficient technologies to minimize operating expenses and maximize satellite transponder utilization. Our parent company, Comtech Telecommunications Corporation [NASDAQ: CMTL] had another record year in
2007, with $445.7 million in net sales with all three-business segments remaining strong.

Commenting on the upcoming year, Fred Kornberg, President and Chief Executive Officer of Comtech Telecommunications Corp., stated, “As we look forward to fiscal 2008, we are confident that we are well-positioned for another year of record sales and earnings."—Tempe, Arizona