Gilat Inks Deal For 100,000 VSATs Amid $58.6 Million Loss
By David Williams, dwilliams@pbimedia.com
Gilat Satellite Networks Ltd. [GILTF] has signed an interim agreement to
supply 100,000 VSATs for "a very large multinational company to provide a ...
broadband satellite communications network in Europe," company officials
say.
Gilat did not identify its prospective customer. It made the announcement as
part of the financial report for its first quarter, in which the company said it lost
$58.6 million.
Assuming that the deal goes through, the purchase would be one of the
largest VSAT networks on record. Gilat representatives said it would be "the
foundation for Europe's first consumer, two-way broadband satellite Internet
service, which the provider plans to publicly launch in the near future.
"The deal is a wholesale agreement for services and equipment. The customer
will be committed to purchase 10,000 VSATs from Gilat over a three-year
period," company officials added.
"Though the interim agreement itself is binding, the parties have agreed to
conclude the final details in a definitive agreement within 90 days of signing
the interim agreement," Gilat officials said. The company added that it's not a
done deal yet, and it cannot be certain that it will be finalized.
Gilat, which usually announces large contracts as part of its quarterly
financial reports, revealed several other large VSAT contracts, including:
AT&T Europe chose it to supply 3,000 Skystar Advantage units for "a
large retail industry client."
Portugal Telecom [PT], Portugal's largest carrier, selected Gilat to
supply a 520-site network for the nationwide lottery system. In addition
to handling the lottery agency's needs, Portugal Telecom also plans to
use the system for high-speed Internet access and business TV
applications.
Telerep, a Peruvian telecommunications integrator, chose Gilat to
provide a fixed rural satellite telephony network for use in public calling
offices in almost 2,000 communities throughout the country. The
network will provide high-speed Internet access in more than 200 of
those communities.
In Brazil, the Star One partnership of Embratel [EMT] and Société
Européenne des Satellites has placed an initial order for 3,700
VSATs for that country's first consumer, satellite-based broadband
Internet service.
Elsewhere in its financial announcement, the company said the StarBand
Communications consumer/SOHO Internet service, in which it is a major
partner, has changed its strategy to a wholesale distribution model, that calls
for "partners selling StarBand service [to] assume responsibility for customer
acquisition costs, as well as equipment subsidies.
"Because of this strategic evolution, StarBand's expected cash requirements
for growth will be substantially lower than previous estimates," the company
statement said. "Based on StarBand's new business model's reduced cash
requirements, StarBand is actively pursuing financing options, including
additional strategic equity investment from potential distribution partners or
key suppliers," the statement said.
In the profit/loss section of its announcement, Gilat indicated it lost about
$58.6 million or $2.51 per diluted share on revenue of $100.3 million during the
quarter that ended March 31.
This compares with the first quarter of 2000, when the company earned about
$6.5 million or 28 cents per diluted share on revenue of more than $85.9
million.
A major reason for the loss was a previously announced restructuring charge
of $28 million and a $20 million charge to increase bed debt reserves, the
company noted.
Chairman and CEO Yoel Gat said, "As the result of further analysis of our
company, our receivables and our focus markets, we are taking charges
today which we believe are required, due to the continuing industry and
market challenges."
Gat maintained the company's financial guidance for the remainder of 2001,
which called for revenue of $125 million, $150 million and $200 million and
profits of per share of 15 cents, 33 cents and 65 cents during the second,
third and fourth quarters respectively.
The Bottom Line
Gilat combined good news with the bad in its first-quarter financial
announcement. It's close to finalizing a deal to supply 100,000 VSATs during
a three-year period, which will be a big plus, but it also lost $58.6 million, or
$2.51 per share, during the first quarter. |
