Boeing to abandon commercial satellite flights, take $1.1 billion charge
Tuesday, July 15th 2003, 12:00 am
By: News On 6
CHICAGO (AP) _ Boeing Co., already pummeled by the downturn in the airline industry, said Tuesday it will abandon commercial satellite launches for five years and take a $1.1 billion charge for its ailing satellite business.
The company said the decision reflects higher launch costs and weakened demand for both its launches and its satellite-making business. Chief executive Phil Condit cited a ``terrible marketplace'' along with some technology and performance problems.
Boeing will now focus exclusively on the U.S. military as a customer for its Delta IV satellite launches.
The announcement culminates several years of struggles at Boeing's California-based satellite operations, the weak link in its expanding and otherwise prosperous defense and space business.
It also reflects another notable setback for a company that has relied on its defense and space operations to turn a profit during the turbulent commercial airplane environment since the 2001 attacks.
Besides the air travel slump, Boeing has been struggling with a difficult satellite market since it acquired the satellite-making holdings of Hughes Electronics Corp. in October 2000.
The news sent Boeing shares down $1.14, or 3.3 percent, to $33.44 in late trading on the New York Stock Exchange.
There were only three commercial satellite orders worldwide last year that were large enough to justify a Delta IV launch, said Paul Nisbet, an analyst for JSA Research.
Boeing said the pretax charge will amount to about 87 cents a share when it reports second-quarter earnings July 23.
Boeing's annual earnings fell to $492 million last year from $2.83 billion in 2001.
The news came on the same day that satellite maker Loral Space & Communications Ltd. filed for Chapter 11 bankruptcy protection _ another example of the troubles facing the satellite business.