Globalstar Stock Loses Altitude
Globalstar Telecommunications lost 12 satellites after a rocket malfunctioned during a launch in Kazakhstan Wednesday, setting back its plans to offer worldwide wireless service by mid-1999.
The rocket was not the only thing to crash. Globalstar stock has dived 7 5/16 to 10 9/16, a 41 percent loss. Its 42-percent owner, Loral Space and Communications (LOR), has also plunged, off 4 13/16, or 27 percent, to 13 1/4. And Qualcomm (QCOM), another big stakeholder, lost 4 3/16 to 45 5/16.
Those losses helped to drag the whole telecommunications sector lower. The Nasdaq telecom index, for instance, was down 3.5 percent.The failure comes a day after Globalstar rival Iridium (IRIDF) said it will delay the start of service on its satellite wireless network because of software and technical problems.
Globalstar said Thursday that preliminary data points to a problem in the second stage of the rocket. The failed launch took place at the Baikonur Cosmodrome in Kazakhstan.
Globalstar (GSTRF) said it's "assessing its options relating to its future launch schedule and still intends to initiate commercial service before the end of 1999." The company said it may speed up other launches to make up for the lost satellites.
Lehman Brothers analyst Robert Kaimowitz, however, said in a research note that "management has stated in the past that the failure of this Zenit-2 launch would set the project back by six months to a year." That could push the system's start up into 2000 notwithstanding Globalstar's vow to be operational by the end of 1999.
As a result, Kaimowitz cut his rating on the stock to a "hold" from a "strong buy." He also reduced Loral to a "hold" from a "buy."
Globalstar plans to build 64 satellites, including eight in-orbit spares and eight ground spares. At present, "14 satellites are at the launch base in Baikonur; 16 more are in final integration and test; and, the balance are under construction," the company said.
The 12 lost satellites, which the company said cost $15 million apiece, wre fully insured.
Globalstar insisted it will send at least 32 satellites into orbit before the end of 1999, at which point it could begin commercial service. Eventually the company will have 48 satellites in its network, as initially planned.
On Wednesday Iridium Globalstar's chief competitor, announced it's delaying the start of its service at least until Nov 1.
Iridium, which is now conducting a massive advertising campaign, had initially planned to start service Sept 23. Still, Iridium has a six-month lead on Globalstar, and perhaps much more after the latest rocket failure.
Iridium, a spin-off of Motorola (MOT), was down 1/2 to 34.
Written By Jeffry Bartash