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Dear Mr. Berko:

Dear H.D.:

In late 1997, when two of the world’s largest merchants of death, Loral Corp. and Lockheed Martin Corp., merged their killing resources, they sold their less lethal assets to a small company called L-3 Communications Holdings Inc. (LLL-$103.49). So LLL became the supplier of choice for optics, avionics, microwave components, secure communications systems, telemetry and other less lethal hardware to most of the nation’s defense contractors. In mid-1998, Lehman Bros. took LLL public with a 6 million-share initial public offering at $22. After a 2-for-1 split in 2002, the stock has traded between $45 and $115 a share.

Since its genesis in 1998, LLL’s revenues surged from $1.1 billion to nearly $15 billion, and net income exploded to almost $1 billion on profit margins that doubled in the past decade. General Dynamics Corp., Northrup Grumman Corp., The Boeing Co., Lockheed Martin Corp. and Raytheon Co. build rockets, aircraft, bombs, missiles and the big guns that deliver death, while LLL designs, produces and sells the systems to make certain they’re on target. It’s a marvelously symbiotic relationship.

Killing people and destroying homes, bridges, schools and infrastructure is a wonderfully profitable business, and hundreds of billions of dollars are spent each year in pursuit of this noble global goal. So every time a bomb blows or a missile strikes, a chopper crashes or a communications system fails, L-3 is Johnny on the spot with a replacement, and the Pentagon doesn’t ask for competitive bids.

Management has ingeniously placed systems and sensors on myriad platforms without overexposure to any one ship, plane or vehicle. L-3 seems to be able to stay ahead of the pack with well-placed lobbyists in Congress and the Pentagon to position itself in advance of changes in demand.

However, I believe ProVision scanners, which will sell for $150,000 each, might be much too revealing for the public’s taste. The machine performs kind of an electronic strip-search that bounces radio frequency signals off your body to form a life-size onscreen image that is viewed by Transportation Security Administration (TSA) gawks in another room.

LLL believes the scanners will be used at sports arenas, theme parks, state and federal buildings, museums, schools and other venues where crowds gather to view an event. I’m uncomfortable with this device, but it might be a necessary evil because our government ties itself into politically correct knots to avoid profiling people.

Though the ProVision contraption could generate good sales, LLL’s arsenal of more sophisticated products will do a better job of moving revenues and profits into the future. Most analysts have an “outperform” rating on LLL.

As long as there are battles to be fought, cities to be destroyed and people to be killed, LLL will provide the delivery systems to do it. So hitch a ride and become an LLL shareholder.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net. © Copley News Service