GLOBALSTAR LOSS FORCES LORAL TO FOCUS ON NEW PARTNERS
Loral plans to write off $1 billion loss on Globalstar “to get it behind us” while looking for new strategic partnerships to spur new growth in company (CD Feb 2 p3), CEO Bernard Schwartz told investors in conference call Thurs. He admitted company was exploring options to increase profitability and making plans to sell ChinaSat 8 satellite, if deal falls through or U.S. doesn’t authorize contract because of stringent export controls. Schwartz didn’t rule out sale or strategic alliance with another company. “There are continuing discussions across the board for consolidation,” he said: “These discussions are taking place on many levels. There is strong desire among Europeans to get into the U.S. market and among U.S. companies” to access European market: “I don’t expect any imminent decision on any discussions that Loral has participated in, but discussions are ongoing.”
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Schwartz said Loral had established task force of Globalstar executives and representatives from service providers to study future of company, with results due by end of March. He said company wouldn’t lose money on ChinaSat8 satellite. He said if approval for license wasn’t granted (CD Feb 7 p5), company could “refurbish the satellite to sell it.” He said there was great “demand for that kind of vehicle in our market,” but Schwartz didn’t expect that to happen in Republican Administration: “The history of my very long personal experience is our business has always done well under Republicans rather than Democrats. We hope to get this issue resolved this year.”
Company had $1.09 billion net loss in 4th quarter after losing $1.01 investment on Globalstar, Loral said. In same 1999 period, Loral lost $122.8 million (-42 cents per share). New numbers resulted in loss of $3.65 per share, 25 cents before Globalstar charges, but overall total was far greater than 49 cents expected by analysts. Revenue for 4th quarter was $399.5 million, down from $515.1 million year earlier. Schwartz predicted satellite manufacturing and technology units would return to 10% margin range for earnings before tax, depreciation and amortization (EBITDA) this year. EBITDA for 2000 was $155 million with 50% increase expected for 2001. Loral EBITDA for 4th quarter was $21 million, reversing $21 million loss in 4th quarter 1999. Company anticipates spending $340 million, including $260 million to continue work on 3 satellites scheduled for launch in 2002. Another $80 million will go for manufacturing and ground- based capital operations.
Despite loss, Schwartz said he didn’t believe satellite consolidation (CD Feb 15 p3) was key to survival. He said company would use “consolidation as springboard to profitability,” but “limited role” in Globalstar operation and “revised strategy” with focus on satellite service manufacturing and fixed satellite services would lead to brighter financial future. He expects to increase revenue 10% per year “for foreseeable future” as satellites become larger, more powerful and capable of carrying more technologically advanced payloads. “We're operating at full capacity” and there still is “robust demand” for services. “There is a misconception in the industry about pressure being put on prices. The rate environment outside America remains firm. The bulk of our outstanding proposals are for external satellites.” Schwartz said Loral should continue to hold 30% share of market. - - Bruce Branch