Qualcomm Doesn't Plan to Add to Globalstar Stake Now
New York, June 16 (Bloomberg) -- Qualcomm Inc. doesn't immediately plan to invest more cash into satellite-telephone company Globalstar Telecommunications Ltd. and could take up to a $600 million charge if Globalstar fails, Qualcomm's chief financial officer said. That's not chicken feed!
Qualcomm, which makes satellite phones for Globalstar, would take the one-time charge if Globalstar isn't recoverable, CFO Anthony Thornley said in an interview. Qualcomm, which has invested $500 million in Globalstar, would consider investing more money if Qualcomm believes Globalstar will succeed, he said. Qualcomm has a 6.5 percent interest in Globalstar.
Globalstar, 40-percent owned by Loral Space & Communications Ltd., is the only satellite-phone company that hasn't filed for bankruptcy protection or shut down. Rival ICO Global Communications Ltd. was bought by cellular pioneer Craig McCaw and is now being reorganized. Iridium LLC is in bankruptcy court after ceasing its 66-satellite operation in mid-March.
Globalstar last month said it had $234.7 million in cash and was spending about $125 million a quarter to build its satellite system. First-quarter revenue totaled $609,000. Globalstar has said it needs $160 million in revenue this year. Qualcomm is committed to Globalstar, but admitted growth has been slow, Thornley said.
Qualcomm isn't ``committed to put more money in but would consider it if we feel confident Globalstar requires money and their business plan is satisfactory,'' Thornley said.
Globalstar hasn't approached any of its investors for funding because it doesn't immediately need the money, said Bernard Schwartz, Chairman and CEO of Globalstar and Loral.
``Around September or October we will require more cash,'' Schwartz said. ``We'll take the most appropriate way available, but it's a decision I don't have to make now because I think our situation is going to get stronger ... through phone sales.''
Globalstar shares rose 3/32 to 6 17/32. The New York-based company's shares have fallen 85 percent this year as phone production delays slowed the introduction of its service. Qualcomm contributed to the delay when it failed to deliver phones in January. Globalstar started service in October.
Globalstar has said it will run out of money in four months without more funding. The company is negotiating with Chase Manhattan Bank to extend a $250 million line of credit beyond June 30, Globalstar said.
``We'll need a maximum of $160 million depending on revenue,'' Schwartz said.
Loral estimates it will have $450 million in cash at year's end, but wouldn't disclose how much it may give to Globalstar, a Loral spokesman said. Globalstar, which hasn't reported subscriber numbers, plans to detail how many phones it's sold in August, Schwartz said.
Chase H&Q analyst Ed Snyder reduced his fiscal-year 2000 and 2001 earnings estimate yesterday on Qualcomm and said Globalstar could reduce Qualcomm's earnings by 10 cents a share next year if Globalstar goes bankrupt.
Globalstar other investors include Vodafone AirTouch Plc, China Telecom Ltd. and DaimlerChrysler AG.
Shares of San Diego, California-based Qualcomm rose 4 5/16 to 65 3/4. |
