Fine posts by Valueman and Rocket Scientist.
A few comments on Bernard Schwartz that may fill out some points already made: the shortfall of Loral transponder revenues last year. Seems to me they are attributable to a fairly wide economic collapse in satellite serviced nations beginning in late 1997. The November 1997 projections Valueman mentions could in no way foresee this. I do not think Schwartz can really be held responsible for the numbers being so far off then. Take PanAmsat. Similar slowdown in numbers. Its Chairman is gone. PanAmSat further did not build the GEOsats it uses and some of which failed last year. (Who was running Hughes anyway when those failed PanAmSats were built by Hughes? He is not at Hughes anymore. He's at another company). The PanAmSat CEO also did not cause the currency crisis that broke the economic back of many satellite intensive countries, hurting PanAmSat growth rates. But he's out nevertheless.
Nor could Schwartz foresee the sloppiness in satellite manufacturing that developed. Or the launch blow ups last year for which launch providers bent on getting birds in orbit are responsible. These two events are partly responsible for the slowdown in the GEOsat launches Loral had written up in their November 1997 report. "Handle with care" took on a new meaning in the 4th q of 1998.
Frank Lanza, now at L3, and formerly Schwartz's right hand man, probably is a loss to Schwartz.
However, the quality control problems at SSL have been quietly dealt with through various changes from all appearances. Launch companies have that old healthy paranoia about their rockets again. And Asia's economic downturn seems to have weathered the absolute worst. Skynet is getting its staffing number down to make it more competitive with PanAmSat's margins.
Valueman made a great point on questioning aerospace multiples on Loral's EBITDA. I mentioned somewhat similar points to a Wall Street analyst. His response? PanAmSat has a 10 multiple, Loral Skynet deserves no better. According to whom? Why does PanAmSat have a 10 multiple on its EBITDA, when cable companies are supposedly worth $3,000 a customer? If Skynet's Telstar 5 provides broadcasts to 5 million viewers, what price do we suddenly get for it as a part of Loral? (The 10 multiple doesn't work anymore, folks). Does Telstar do something so different than a cable provider? A cable provider signs up customers. And then the cable provider signs up Loral Telstar so it can meet cable broadcast promises to the subscribers. No satellite? No promises, no cable companies, no subscribers.
Non-Wall Street satellite research makes a reasonable case about Wall Street analysts valuations. Lehman has a $32 year end target for Loral, JP Morgan $23. Both prices are reached by a "sum of the parts" valuation. Why the big price difference? Too much guess work is my guess. Do you then instead value the company on its break-up liquidation worth after all debt has been paid? A lot less guessing there. Or do you take a reliable earnings number 4 years out and discount the value per share back from that "terminal" year? Three methods, and three totally different valuations result.
Schwartz escapes blame for the price methods.
Anyone notice no analysts are recommending Loral or Globalstar anymore now that their share prices are descending?
Schwartz's donations to the Democrats? He donated to Alfonse D'Amato of New York, and was on Colin Powell's fund raising committee. On ABC's This Week Schwartz in May 1998 related how New York City Democratic wardmen gave his family dinners on Thanksgiving, and helped them out when it was needed. Memories that go back 65 years are apparently hard to break...
This is to put his Democratic Party donations in some context. Was Schwartz given favors? How does one account for the rejection of SSL GOES contracts for the US government then under Clinton?
The forthcoming Cox Report? From Washington Times clippings it says that the report holds that just about every US technology company sold secrets to our enemies from the Reagan Administration on. Is it factual?
What is the saying "If everyone did it, then no one did it"?
Did BLS misread the Globalstar market? One MSS report says only one mobile provider will survive. Other reports say that 50 million users are the market. How make sense of either report with such wide differences? IMO, market it correctly, and the service will sell. There is a market, and has anyone thought that maybe a partial reason Iridium is not selling so well is that Globalstar is known to be substantially less in price for a similar product? Why buy or try out now when something similar and substantially cheaper is less than a year off? Just a thought.
It's not true that Globalstar did not have a back-up launch plan after the Zenit. Globalstar did not have a launch plan that would be able to anticipate a September 1998 change in US policies on licensing. Suddenly what was previously a pro forma exchange of diplomatic letters becomes a negotiated treaty with all sorts of muddle for a "tin can" to launch off a Russian rocket. (The Globalstar LEO-- it's a tin can relative to Russian spy satellites-- as if the Russians could find out something to help their satellite tech from a LEO). Schwartz can't be held responsible for the licensing change. The change in licensing rules cost Globalstar hundreds of millions of dollars. That's what Schwartz got for his political donations to the Democratic Party.
And the Zenit itself? Didn't the Zenit in July and August of 1998 have two successes right before Globalstar? Was it a mistake to use it? Maybe not if it had launched in July, or August, of 1998...
Gregory Clark, an "heir apparent"? It does not appear that Bernard Schwartz lets others manage his money. Old "Bernie" watchers can confirm that. If he leaves Loral, he'll be taking his money with him. If he wants his shares to be worth a lot more than otherwise, he ought to make the new Loral (Loral Space and Communications) more investor responsive and more publicity minded. That's all I can really fault him for, and fault him strongly. The only question that remains with BLS on the "heir apparent" question is how long he will remain at Loral. It's my bet there won't be an heir when he leaves. But it's only a bet. |
