Lockheed Martin Quits Telecom Business

Lockheed Martin Corporation announced that it will abandon its telecommunication services business, sell its stake in Intelsat, Inmarsat and New Skies NV and other satellite ventures, and take a US$1.7 billion charge. The company will immediately reassign certain of the former Lockheed Martin Global Telecommunications (LMGT) businesses and investments to other operating segments of Lockheed Martin, sell the remaining operations, position investments for monetization, and eliminate the LMGT administrative structure. Quitting the telecommunication business will reduce the number of Lockheed operating units to four from five.

Vance Coffman, CEO, said Lockheed Martin is reducing its exposure due to the “…continuing overcapacity in the telecommunications industry worldwide, and deteriorating business and economic conditions in Latin America…”

Based on preliminary information and assessments, Lockheed Martin expects to recognize after-tax nonrecurring and unusual charges in the fourth quarter of 2001 totaling US$1.7 billion, or US$3.96 per share (US$2.0 billion on a pretax basis) related to these actions. The estimated charges reflect impairment in the values of certain LMGT businesses and investments, goodwill (approximately US$1.2 billion) and other assets as well as costs associated with infrastructure reductions, including severance, and facilities. Included in this charge is approximately US$255 million (US$400 million pretax) related to a write-down of the Corporation's investment in Astrolink International LLC and other associated costs. The cash impact of the fourth quarter charge is not expected to be material and should amount to less than 2 percent of the total charge.

The jobs being cut represent about 18.6 percent of the division's work force of 3,500 people. Approximately 650 positions will be eliminated as a result of these actions. These employees can apply for job openings with other Lockheed Martin operating companies and to date, about one third have accepted or have been extended offers. The remaining 2,850 workers will be shifted to Lockheed Martin's other companies.

LMGT's Systems & Technology line of business and its COMSAT General telecommunications unit will be realigned with the Space Systems business segment.  The combined annual revenue for these two units is approximately US$150 million.

LMGT's Enterprise Solutions-U.S. commercial information technology business will be realigned with the Corporation's Technology Services business segment. Enterprise Solutions-U.S.'s annual revenue is approximately US$300 million.

LMGT's remaining operating businesses will be evaluated for divestiture and its equity investments positioned for monetization. In the interim, the operating businesses will be reported as discontinued operations, and the investments will be included in the Corporate and Other segment for financial reporting purposes. Discontinued operating businesses and divestiture candidates include: Satellite Services (COMSAT Mobile Communications, World Systems and Lockheed Martin Intersputnik); and Enterprise Solutions- International (providing telecommunications network services primarily in Latin America). The disposition of these assets will be subject to valuation, negotiation, and appropriate Corporate approval. Lockheed Martin has reached an agreement to sell the COMSAT Mobile Communications operations (which provides global service via the Inmarsat system) to Telenor of Norway for US$116.5 million in cash. The sale is anticipated to close by year-end and is not expected to have a material earnings impact.

LMGT's equity investments to be reported in the Corporate and Other segment include: INTELSAT (24% ownership), Inmarsat (14% ownership), New Skies, N.V. (14% ownership), ACeS International (33% ownership), Americom Asia-Pacific (50% ownership) and Astrolink International (31% ownership). 

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