Hi Nancy,
Boeing, in Strategic Shift, to Develop Own Satellite Systems and Services
By JEFF COLE Staff Reporter of THE WALL STREET JOURNAL
Boeing Co., in a strategic shift, will develop its own high-capacity satellite systems and services, senior executives said.
The move by the Seattle-based maker of planes, rockets and satellites reverses its earlier reluctance to be a service provider. Now, the aerospace company expects to settle in the weeks ahead precisely how it will form strategic partnerships to become a wholesaler of broadband, data and multimedia services, as well as mobile telephone service, said Boeing President Harry Stonecipher.
Seeking a niche in the increasingly crowded field of expensive satellite communications projects, Boeing will target "high mobility" customers, including airline passengers and airlines, business-jet owners, and military-aircraft crews and operators, as well as globe-trotting users of mobile telephones.
"We have the money in our plan to do what we want to do," Mr. Stonecipher said in an interview. He added that the big maker of aerospace hardware has been "frustrated by the slow progress" of the proposed Teledesic LLC system in which Boeing is an investor and expects to be a contractor. "As far as I'm concerned, we're late ... ," said Mr. Stonecipher. "We just need to get started."
Mr. Stonecipher and other executives declined to discuss details of Boeing's emerging plan. However, Mr. Stonecipher and Jim Albaugh, president of Boeing's space and communications unit, said they are aware of the risks of entering the services realm and are taking pains to reduce them. Mr. Albaugh said his teams have been developing hardware, performing demonstrations, meeting with potential partners and examining a range of business cases.
Costly Campaign
The move -- which includes a goal of establishing a new Boeing-designed satellite system or devising one with partners -- marks a major strategic leap in Boeing's costly campaign to take the lead in fast-growing U.S. space and satellite-communications industries. Boeing officials are talking up their interest in expanding in space-related markets with investors, and at this week's Paris Air Show.
The maneuver also involves risks that Boeing has been unwilling to absorb in the past. The first developer of a costly new-generation satellite system, mobile-phone provider Iridium LLC, has hit its own strategic snags and has failed to attract enough customers to make its service broadly affordable so far.
Boeing already is pouring billions of dollars into new satellite launch systems, including a new Alabama factory to produce them, in a bid to overtake the lead in providing that hardware in competition against U.S. rivals such as Lockheed Martin Corp. and Europe's Arianespace SA, based in France. Some parts of that initiative have shown early signs of success.
Mr. Albaugh said in an interview that Boeing's shift results from its increasing eagerness to tap deeply into "the real growth" in the market. The aerospace industry projects that communications via satellite will triple by the early part of the next century, reaching $160 billion a year in revenue.
Internet Access
Many competitors have been drawn by those projections and the related prospect of double-digit profit margins. Beyond Iridium, which is backed by Motorola and others, companies such as Loral Space & Communications Ltd., Hughes Electronics Corp., Lockheed Martin and TRW Inc. have committed more than $13 billion to projects that aim to provide services ranging from go-anywhere mobile phones to broadband, two-way corporate data networks and high-speed Internet access. Teledesic, backed Microsoft Chairman Bill Gates and cellular-phone pioneer Craig McCaw, is aiming toward the latter few markets.
Mr. Stonecipher said that while he feels Boeing is late to the market, the company may also benefit from the experiences of earlier entrants. He also said that Boeing's investment strategy will be unique and that Boeing doesn't need to bear the risk alone.
One space-communications option being studied closely by Boeing is a possible acquisition of the low-cost Ellipso mobile phone system proposed by closely held Mobile Communications Holdings Inc. of Washington, D.C. Mr. Stonecipher has been somewhat negative about that prospect, while Mr. Albaugh says it remains a possibility under the right conditions.
and it continues on to executive jets
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