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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: Dealer who wrote (10466)	10/31/2000 8:35:52 AM
From: Dealer	Read Replies (1) \| Respond to of 65232

QCOM/GSTRF--Globalstar Revises Its Marketing Plan, As Stock Falls 60% on 3rd-Quarter Loss By Andy Pasztor Staff Reporter of The Wall Street Journal Globalstar Telecommunications LP reported a larger-than-expected $211.2 million third-quarter loss and saw its already battered stock plunge 60%, even as the company rolled out a new marketing strategy. Amid heavy trading and heightened investor jitters about its viability, the San Jose, Calif., satellite-services provider jettisoned longstanding business plans primarily targeting individual mobile-telephone subscribers. Acknowledging that the original strategy produced "unacceptably slow" subscriber growth that yielded only $1.2 million in revenue in the latest period, Globalstar Chairman Bernard Schwartz Monday announced that the new focus instead will shift to pursuing government, military and large corporate customers. Delays in launching service, various distribution problems and poor subscriber growth have hurt Globalstar over the months, which in turn has dragged down the earnings and stock price of Loral Space & Communications Ltd. Loral conceived and owns 40% of the satellite system and Mr. Schwartz is also its chairman and chief executive. In an effort to prop up its stock and distance itself from Globalstar's problems, Loral has decided to discontinue further investment in the venture unless there is a marked upturn in new customers. After investing about $1 billion in the project so far and finding it difficult to finance some of its own initiatives, Loral also has said it is mulling the possibility of forming a strategic venture or some other alliance with another satellite industry player. To become a self-sustaining business, Globalstar insiders believe, the company by next summer must show a big jump in quarterly revenue to at least $60 million and perhaps closer to $100 million. In its initial nine months of commercial operation, Globalstar's 48-satellite system has reported total revenue of $2.5 million and is being used by slightly more than 21,000 mobile subscribers. Until a few months ago, Mr. Schwartz was predicting that Globalstar would have as many as 500,000 subscribers by the end of the year. Monday, he declined to predict future revenue or customer growth, except to stress that management believes it still has "enough time to build momentum" and is "going to stay the course." Acknowledging that he was surprised by the stock activity, he added, "I don't think it's a hammerstroke against Globalstar." Globalstar's effort Monday to reinvent itself wasn't embraced by many investors or analysts. At 4 p.m. Monday on the Nasdaq Stock Market, Globalstar shares fell $3.63 to $2.38; shares in Qualcomm Inc., which provides handsets to and is a partner in Globalstar, dropped $6.75, or 9%, to $68.13 on Nasdaq. Mr. Schwartz told investors the company has enough cash and financing on hand to operate normally through roughly the middle of next year. He added that in coming months the company would launch a new advertising campaign, create a centralized marketing organization and provide free or discounted phones and service in an effort to raise subscriber numbers. In a conference call, investors and Wall Street analysts peppered Mr. Schwartz with questions about whether Globalstar or its partners are contemplating taking drastic actions, including possibly seeking bankruptcy protection. Repeatedly predicting that the revamped and stepped-up marketing push will improve results and demonstrate the venture's "commercial viability," Mr. Schwartz said Globalstar "is not on life support" and "there [are] no extreme measures" under way. Yet Globalstar's third-quarter net loss of $1 a share, its continued revenue disappointments and its bloodied share price mean the company still faces an uphill battle, analysts said. Consensus estimates, for example, had been for a loss of 90 cents a share. Service in some important regions, including China and Russia, is just now ramping up after months of delays, while ground installations and approvals in other parts of the world still aren't in place. (Globalstar didn't begin offering commercial service until February, so there aren't comparable financial figures for 1999.) Mr. Schwartz said one bright spot is that the Defense Department is showing "a very keen interest" in buying Globalstar's service. As part of the new marketing push, the company also is targeting other government and military organizations around the world. The company is also setting its sights on corporate users.