L3 Technologies [LLL] on Wednesday night said that Chairman and CEO Michael Strianese will retire at the end of this year from his CEO role and that Chris Kubasik, who is currently president and chief operating officer (COO), will become CEO on Jan. 1, 2018.
Kubasik, 56, well thought of in the investment community for his keen focus on operational processes and financial know-how, will lead $10.5 billion L3 two years after joining the company as president and COO to run operations and focus on growth and performance.
“Looking ahead, we are executing our growth strategy by emphasizing program performance, investing in advanced technologies, enhancing business development, and continuing to identify opportunistic acquisitions that create value for our customers and our shareholders,” Kubasik said in a statement.
Kubasik joined L3 in Oct. 2015 after spending nearly two years with the global consulting firm Seabury Group, which is now part of Accenture [ACN], where he worked with aerospace and defense clients.
Kubasik’s pending ascension to the chief executive role at L3 follows by several years his stunning ouster at the nation’s largest defense contractor, Lockheed Martin [LMT], in 2012 due an alleged affair with a subordinate, violating the company’s code of conduct. Kubasik’s firing from Lockheed Martin paved the way for Marillyn Hewson to eventually lead the company once Bob Stevens stepped down as CEO on Jan. 1, 2013.
Before his departure, Kubasik was vice chairman, president and COO at Lockheed Martin, taking on the latter two positions in Jan. 2010 and the vice chairman spot, created for him, in June 2012. He was also the company’s chief financial officer between 2001 and 2007, and from 2007 until 2009 he led the Electronic Systems segment, which did more than $11 billion in business when he was in charge.
Seth Seifman, J.P. Morgan’s aerospace and defense analyst, said in a note to clients on Thursday that L3’s announcement is “positive” because it sets a clear path for the transition. He pointed out that investors know Kubasik well from his time as Lockheed Martin’s CFO and “have confidence in his ability to run L3 well.”
Howard Rubel, an analyst with Jefferies, also said L3’s announcement removes any uncertainty around the company’s succession plans and praised Kubasik for working with “customers to expand the enterprise … and sharpened its competitive and strategic edge.”
Seifman doesn’t expect any major changes in the near-term given the five-month transition until Kubasik becomes president and CEO, but believes that his “stamp” on L3 will be seen over time. He pointed to two key areas where Kubasik has had a significant role in making his mark since joining the company, one being a more balanced capital deployment strategy between mergers and acquisitions, and share repurchases, versus Strianese’s emphasis on returning cash to shareholders.
Strianese, 61, became L3’s president and CEO after the sudden death of its former chief Frank Lanza in 2006. Under Strianese, the company declared its first dividend and adopted a more careful approach to acquisitions, which were a key element of the company’s growth strategy.
Kubasik is also expected to put more focus on the company’s ongoing “efforts to streamline operations and consolidate the company,” Seifman said.
Strianese has been with L3 since its founding in 1997 and will remain as chairman beginning next January. Rubel credited Strianese with leading L3 through both an upturn and downturn in defense spending, “expanding and then focusing the company’s portfolio, generating significant growth and value for its shareholders.”
L3 is scheduled to report its second quarter results on July 27. The company’s earnings call will give Strianese and Kubasik an opportunity to discuss the transition and way forward and field related questions from analysts.