Globalstar
First Quarter Results Leave Financial Investor Analysts Whispering
Bankruptcy
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Globalstar
Telecommunications first quarter results are leaving the financial
analyst community unimpressed, with some analysts suggesting that
if the current trends continue, bankruptcy may become a
possibility. Globalstar
Telecommunications now offers full commercial satellite wireless
service in 38 countries, and plans to expand service to 50
countries by the end of June 2000. In releasing their first
quarter 2000 results, Globalstar reported booking US$609,000 in
revenue. Before interest, taxes, depreciation and amortization,
the company lost US$57.1 million. The net loss for the quarter was
US$216.1 million or US$3.53 a share.
Perhaps most
discouraging is the fact that Globalstar logged only 550,000
billable minutes of usage. Although, Globalstar did not release
subscriber data, Salomon Smith Barney estimates that if users
averaged 160 minutes a month, Globalstar would have signed up only
1,150 subscribers. If average use is 80 minutes a month the
subscriber count rises to 2,300. Whatever the real number was, it
was low enough to lead Salomon Smith Barney to slash its estimate
of year-end 2000 subscribers to 80,000 from 350,000. The brokerage
firm also cut its 2000 revenue estimate to US$21 million from
US$86 million. The disappointing subscriber growth reported in the
first quarter of 2000 suggests that the market for these phones is
much smaller than expected. Aram Fuchs published in Telecom
Analyst, “Globalstar either has to find a way to accelerate
subscriber growth, or it must sell substantial amounts of equity
in order to finance its large losses.”
Some analysts are
beginning to offer assessments that if Globalstar’s woes
continue, bankruptcy could result. Upside Today financial
writer Stefani Baldwin reported on June 15, “Rumors that
Globalstar is on the brink of bankruptcy have been circulating.”
Individual Investor on-line columnist Judith Graham
reported June 16 that, “Globalstar is on course to run out of
cash in four months without more funding, and phone production
delays have slowed the introduction of its service, the company
appears to be on the road to bankruptcy.” Glen Curtis, columnist
for worldlyinvestor.com also reported on June 16 that,
“without some financial backing in the near future the company [Globalstar]
may be forced, as Iridium was, to file for bankruptcy.”
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