Relational Asks L-3 Comm to Change Strategy

L-3 Communication has a market cap of $9.3 billion and an EV of $12.3 billion; Relational owns 6%; see earlier post on LLL dated 4/26/11. Item 4.    Purpose of Transaction The Reporting Persons acquired the Shares reported in this Statement because, in their opinion, such Shares are undervalued by the market at the present time. The Company’s Shares have underperformed the S&P 1500 Aerospace & Defense Index and the “core defense group,” as presented by the Company for comparative purposes in its Definitive Proxy Statement on Schedule 14A on March 14, 2011, over the last one-, three- and five-year periods.  The Shares have also underperformed the broader market S&P 500 Index over the last one- and three-year periods. The Reporting Persons believe the Share discount is at least partially attributable to the Company’s sub-optimal business mix and the Company’s current strategy.  The Reporting Persons have discussed these issues from time to time with the Company’s management team and believe management is aware of the issues.  The Reporting Persons believe that the market will reward the Company with a higher share price to earnings multiple if the Company takes strategic and tactical actions to address its business mix.  Such actions could include the disposition or spin-off of underperforming or low-growth, low-margin assets. In particular, the Reporting Persons believe certain of the Company’s assets may lend themselves to acquisition by private equity participants where recent activity has been robust. Based on management’s recent public statements the Reporting Persons are gaining confidence that the Company’s board and management will better address these issues in an effort to increase shareholder value. The Reporting Persons note that several companies within the defense industry have recently benefited from taking such actions. The Reporting Persons intend to closely monitor the Company’s performance, business mix and strategic direction and may modify their plans in the future depending on future events and any actions taken or omitted by the Company.  The Reporting Persons and their representatives and advisers intend to continue their discussions regarding the Company, its business mix, strategic direction, operations and capital allocation discipline with members of the board of directors and management of the Company. In addition, the Reporting Persons and their representatives and advisers may communicate with other shareholders, industry participants and other interested parties concerning the Company. Although the Reporting Persons do not have any current plans other than the monitoring and communication program outlined above, the Reporting Persons reserve the right to, and may in the future exercise any and all of their respective rights as shareholders of the Company in a manner consistent with their equity interests, including seeking representation on the Company’s board of directors at a special or annual meeting of the Company’s shareholders. The Reporting Persons may from time-to-time (i) acquire additional Shares (subject to availability at prices deemed favorable) in the open market, in privately negotiated transactions or otherwise, or (ii) dispose of Shares at prices deemed favorable in the open market, in privately negotiated transactions or otherwise. As of the date of this Statement, except as set forth above, none of the Reporting Persons has any present plan or intention which would result in or relate to any of the actions described in subparagraphs (a) through (j) of Item 4 of Schedule 13D.


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