April 23 (Bloomberg) -- L-3 Communications Holdings Inc., the largest supplier of translators for the U.S. Army, said first-quarter earnings rose 17 percent on wartime demand for linguist and intelligence services. The company raised its full- year forecast.

Net income rose to $162.1 million, or $1.29 a share, beating analysts' estimates, from $138.9 million, or $1.13, a year earlier. Revenue climbed 14 percent $3.3 billion, the New York-based company said today in a statement.

Profit was spurred by revenue from a disputed $4.6 billion U.S. Army translation contract. L-3 lost the award to DynCorp in December, prompting a successful protest to the Government Accountability Office. L-3, which bought Titan Corp. in 2005 for $2.6 billion to expand into the translation market, is looking to make smaller acquisitions in the future as Chief Executive Officer Michael Strianese focuses on the businesses it already owns.

``There's no real true surprises and investors will be satisfied,'' said Myles Walton, a Boston-based analyst at CIBC World Markets, who rates the shares ``sector performer'' and doesn't own any.

L-3 boosted its 2007 profit forecast to $5.65 to $5.75 a share on revenue of $13.2 billion to $13.3 billion. Its previous forecast was for profit of $5.55 to $5.65 and sales of $12.9 billion to $13.1 billion. The company also announced two acquisitions it said will add to this year's earnings.

The company said it repurchased about 2.4 million of its shares today for $200 million.

Shares of L-3 fell 89 cents to $91.63 at 4:01 p.m. in New York Stock Exchange composite trading. They have gained 7.7 percent in the past year.

Surge Benefit

Profit last quarter exceeded the $1.27 average estimate of 10 analysts surveyed by Bloomberg. Sales were estimated at $3.19 billion.

On March 29, the GAO, the investigative arm of Congress, upheld L-3's protest of the Army's contract to provide translators in Iraq. L-3 received a $680 million, nine-month extension of the work from the Army a week earlier because the GAO review delayed bringing in the new supplier. The extension runs through Dec. 9 and also covers translators in Afghanistan and Guantanamo Bay, Cuba.

The Army is challenging the GAO decision and a formal determination on who will ultimately win the translation contract has yet to be made.

``Though we have not incorporated it, we believe there is some upside potential as the troop surge in Iraq could lead to higher demand for linguists,'' Joseph B. Nadol III, a New York- based analyst with J.P. Morgan, in a note to investors in March. He rates the shares ``neutral'' and doesn't own any.

Government Services

President George W. Bush has asked Congress for funding to support sending 21,500 additional forces into Iraq, part of a ``surge'' in troops to quell violence in Baghdad. There are about 141,000 U.S. troops there now.

All four of the company's businesses posted sales increases. The Government Services unit had revenue of $1.02 billion, a 14 percent gain from a year earlier. The Army linguist contract generated $174 million in revenue in the first quarter. L-3 also benefited from direct sales to the governments of Iraq and Afghanistan.

Sales at the Specialized Products division rose 11 percent to $1.08 billion. Acquired businesses helped power revenue by more than 7 percent, mainly due to the purchase of SAM Electronics GmbH in January 2006 and SSG Precision Optronics, Inc. and Nautronix Defense Group in June 2006, according to L-3.

The Aircraft Modernization and Maintenance division posted quarterly sales of $636.9 million, compared with to $561.8 million a year ago. The Command, Control, Communications, Intelligence, Surveillance and Reconnaissance unit boosted sales 19 percent to $553.8 million.

Strategy Shift

L-3, in a shift from its history of acquisitions, is focusing on internal growth rather than mainly acquisitions to raise its bottom line. Chief Financial Officer Ralph D'Ambrosio said last month that while L-3 will continue to make acquisitions, they will be smaller.

The company said today it acquired Geneva Aerospace, Inc., a Dallas-based provider of unmanned aerial vehicle technology, on Jan. 31. Terms of the deal weren't disclosed. The acquisition is expected to generate annual sales of about $12 million for the year ending Dec. 31.

L-3 also said it agreed to purchase Global Communications Solutions, Inc., a Victor, New York-based provider of portable satellite communications systems for the Pentagon. Terms of the deal weren't disclosed. GCS is expected to generate annual sales of about $90 million for the year ending Dec. 31, L-3 in a separate statement today.

``We're still looking at a lot of companies, but we're passing on a lot of companies,'' Strianese said during a conference call today. L-3 will continue to look at buying companies with important technology assets and research and development operations, he said.

Co-founder Frank Lanza, who died in June, built L-3 with more than 80 acquisitions, taking it from about $550 million in sales in 1997 to $9.44 billion in 2005. The company was the Pentagon's seventh-largest prime contractor in 2006, with $5.2 billion in contracts.

To contact the reporter on this story: Jon Steinman in Washington at jsteinman@bloomberg.net.

Last Updated: April 23, 2007 16:13 EDT