GILAT FINANCIAL PICTURE REMAINS GLOOMY
Gilat Satellite Networks, taking $29.4 million in charges to write off investments and in-process R&D, reported $10.2 million 4th-quarter loss against $23 million profit year ago as revenue rose to $174.6 million from $108.9 million. In posting loss and conceding slowdown in VSAT business, Gilat said it would take another unspecified charge against earnings to cover restructuring that includes layoffs. As result, it revised earnings to $25 million ($1 per share) for 2001 on revenue of $575 million, down from analyst projections of $2.43 per share. However, Gilat said earnings would double in 2002 on $675 million revenue.
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
As it lowered earnings forecast, Gilat also cut back projections for production of commercial VSAT and Starband high- speed Internet access products. Combined production this year will be 200,000 units -- 150,000 consumer satellite modems and 50,000 VSAT receivers -- down from original projection of more than 700,000 units. Gilat earlier forecast consumer sales of 250,000-300,000 units by year-end.
Starband, which abandoned proposed IPO earlier this month, had 25,000 customers at quarter’s end, 12,000 of whom were paying $69 monthly fee, Chmn. Yoel Gat told analysts in conference call. Other participants in test are expected to be converted to paying customers by June, he said. Starband reported $100 million in revenue in 2000, about half of it in 4th quarter, Gat said. Starband, which charges about $200 for add-on card sold through RadioShack and $399 for satellite modem marketed via EchoStar dealers and own Web site, had been projected to break even this year. But Gat declined comment on when Starband would turn profit. Starband had 5% gross margin in quarter vs. 40% for Gilat’s VSAT business.
To expand Starband distribution, Gilat has signed deal with National Rural Telephone Cooperative (NRTC) to sell Starband service and extended pact with EchoStar for 3 years, Gat said. EchoStar has $50 million stake in Starband. EchoStar and NRTC officials weren’t available for comment. Starband also plans to have additional retail agreements in place by spring, although Gat declined to identify dealers. With NRTC, Starband has wholesale agreement, he said. Gilat, which has 45% stake in Starband, will support Internet service but will limit “exposure” to $75 million, Gat said, and may seek bridge loan for Starband that would fund operations into 4th quarter. Gilat had $40 million in Starband receivables at quarter’s end.
To update product line, Starband will add dual-tuner modem in spring. Gilat has started production of new modem with 15,000 units due by end of 2nd quarter, Gat said. Starband has suffered from product shortage since debut last fall and Gilat was to add factories in Spain and Brazil to boost capacity. It plans to have “TV-centric” product by 2002, Gat said.
Potential acquisition of Starband satellite operator GE Americom Communications by Societe Europeenne des Satellites (SES) would be “positive” for company, Gat said. Starband delivers service from 8 transponders it leases on GE Americom medium-power satellite at 101 degrees W. Starband currently has 9,400 subscribers per transponder, but plans to move past 13,000 in deploying compression technology later this year, Gat said.