Bloomberg: Globalstar 1st-Qtr Loss Widens; Sales Total $609,000 (Update4)
By Amy Hellickson
New York, May 8 (Bloomberg) -- Globalstar Telecommunications
Ltd., a satellite-phone company that could run out of cash in
about five months, said its first-quarter loss widened on costs
related to expanding its service.
The loss widened to $91.9 million, or 98 cents a share, from
$10.9 million, or 19 cents, a year earlier. Globalstar had revenue
of $609,000, including royalties. A year ago it didn't have
revenue. This was the first time Globalstar, which began service
in October, reported financial results.
Globalstar, 40 percent-owned by Loral Space & Communications
Ltd., has said phone production delays slowed the introduction of
its service. Globalstar LP, a telecommunications partnership that
includes Globalstar Telecommunications, said operating expenses
and other costs rose to $93.7 million from $64.4 million.
Globalstar sold its service in 25 countries on March 31.
Shares of Globalstar rose 3/16 to 10 1/4 on the Nasdaq
National Market. One investor said the stock rose on optimism the
company and its partners, which include Qualcomm Inc. and Vodafone
AirTouch Plc, are committed to providing service.
``We, and I mean investors, are optimistic that orders will
materialize, and their partners will perform,'' said Bob Pugliese,
senior vice president at J.W. Genesis Securities, which owns
Globalstar bonds and Loral stock. ``Hopefully, next quarter we'll
see more tangible results.''
The company was expected to have a loss of 75 cents a share,
the average estimate of five analysts surveyed by First
Call/Thomson Financial.
Globalstar's 11 3/8 percent notes due 2004, which traded near
60 at the end of 1999, have fallen about 45 percent this year and
traded at 35 1/4 today, investors said.
Globalstar shares have fallen 77 percent this year. Loral,
down 65 percent this year, rose 1/16 to 8 5/8 on the New York
Stock Exchange.
Cash Crunch
Globalstar said it had $234.7 million in cash. Chairman and
Chief Executive Bernard Schwartz said last week the company is
spending about $125 million a quarter and will be about $150
million short by the end of the year, assuming the company doesn't
renew a $250 million credit facility due in June and doesn't get
any revenue, Schwartz said.
The company had 550,000 minutes of billable service for its
satellite phones in the quarter. Analysts have said the company
has struggled to gain satellite-phone customers after rival
Iridium LLC folded. Globalstar will report customer numbers later
this quarter.
``I'd estimate that the company only had a couple thousand
subscribers for the quarter'' based on first-quarter revenue, said
C.E. Unterberg, Towbin analyst William Kidd, who has a ``neutral''
rating on the stock.
Globalstar, which said it will rely on revenue from its
service and funding from partners, isn't selling handsets at a
profitable pace, Kidd said.
``We experienced start-up challenges normal for any new
service introduction,'' Schwartz said in a statement. ``But these
issues have been addressed and solved.''
Loral Earnings
Loral, the second-biggest U.S. satellite-communications
company, said its first-quarter loss widened on increased start-up
costs for the Globalstar network.
Loral's loss widened to $123 million, or 49 cents a share,
from $38.5 million, or 17 cents, in the year-ago quarter. Revenue
rose 4 percent to $318.1 million from $305.9 million. The company
was expected have a loss of 36 cents, the average estimate of five
analysts surveyed by First Call/Thomson Financial.
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