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Technology Stocks : Loral Space & Communications -- Ignore unavailable to you. Want to Upgrade?

To: Rocket Scientist who wrote (4335)	8/25/1998 12:24:00 PM
From: Valueman	Respond to of 10852

Revenues are recognized at SS/L using the percentage of completion method, but there is great leeway in how this is figured. I am assuming they will recognize a significant amount of revenue as the contract is completed(in orbit delivery). This may or may not be the case. If you apply average operating margins to the revenue lost by Asian cancellations, SS/L is short $20-30 million there.

To: Rocket Scientist who wrote (4335)	8/25/1998 1:58:00 PM
From: Valueman	Respond to of 10852

Orion--Expectations were for revenues of $137 million and EBITDA of $35 million. Here too they will disappoint. I get the feeling that there are some internal problems at Orion, and some difficulties in mixing Skynet and Orion sales. At the halfway point, we are at $40 million in revenue and essentially zero EBITDA. This is the biggest disappointment for me. Something is wrong, and I have not heard management address this issue. Mr. Schwartz did mention that VSAT business will not be big in the future and that C* will replace many of the functions of a VSAT network. He also alluded to some vague problems with "mechanics" in integrating Orion since March. Internet connectivity is the key here. Revenue per transponder in that situation is huge. They are #2 now behind Intelsat. I do not have any idea where they will end up this year. Last I checked, Orion-1 was about 89% booked, but that was a while back. Why they are not generating more revenue per transponder is unclear--less VSAT business? The VSAT biz greatly increases revenue per transponder(up to $10 million), but at a cost in margins. At this rate, EBITDA contributions will be just a few million. I am going to find out what is going on there. Do realize though that revenue per transponder is still $2.35 million on average, far above the norm, but also far below expectations. Numbers in 99 have completely changed now, with the delay in Orion 3 launch, and the addition of 8 transponders on Orion-2. The quoted lease rate on Orion 3 right now is $1.8 million/transponder. They will also have extensive internet connectivity business here. Supposedly, bookings are excellent. There will be a one time payment from DACOM for their 8 transponders as well. Loral has said this will contribute $42 million in EBITDA. Eliminating this, Loral had estimates of $225 million revenues and $105 million in EBITDA. That is easily obtainable, and likely to be surpassed. One point not brought up yet that is disappointing is that Loral now says that they must kick in another $60 million to complete Orion-2, after saying that both Orion sats were fully funded at the time of the acquisition. How that all washes out in the end with SS/L taking over the project I am not sure. SatMex--With input from Loral coming only in the last two weeks(a union contract negotiation prevented Skynet management from taking over until a couple weeks ago), SatMex would appear to be doing fine. Loral expected $52 million in EBITDA for 98, and they have gotten $20 million. Skynet can now market SatMex services outside Mexico, and Mr. Schwartz said he can cut out $10-15 million in costs immediately. I have complete confidence that SatMex will make its EBITDA numbers for Loral now that management has been ceded to Skynet.