Harris (HRS) agreed to split off its microwave communications unit and merge it with Stratex Networks (STXN) .

Harris will contribute $25 million to the new company, to be called Harris Stratex Networks, and own 56% of the stock. Stratex holders will own the rest. The new company, with annual revenue of around $600 million, is to be listed on the Nasdaq Global Market.

"This transaction will create a leading global communications solutions provider offering end-to-end wireless transmission solutions for mobile and fixed-wireless service providers and private networks," Harris chief Howard Lance said. "The new company's solutions offering will be the broadest in the industry including transport and access microwave radios, carrier-grade Ethernet transmission systems, network management software, and turnkey field services that include network planning, engineering and implementation."

Guy Campbell, president of Harris' microwave communications division, will be CEO. Thomas Waechter, chief executive officer of Stratex Networks, will be chief operating officer, and Sally Dudash, vice president and controller of Harris' microwave communications division, will be chief financial officer.

The companies expect $35 million in annual pretax product cost and expense synergies to be achieved in fiscal year 2008. The transaction is expected to be neutral to Harris' earnings per share in fiscal year 2007 and accretive by approximately 7 cents per diluted share in the fiscal year ending June 2008, excluding a one-time gain as a result of the transaction and acquisition and integration expenses. The transaction is expected to be slightly accretive to Stratex Networks earnings per share in fiscal year 2007 and accretive by approximately 8 cents per diluted share in fiscal year 2008, excluding acquisition and integration expenses.