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PanAmSat Falls 25% on Warning of Lower Profit

Communications: Satellite giant says expansion plans will halve 2001 earnings.

March 30, 2000|From Bloomberg News

GREENWICH, Conn. — PanAmSat Corp., the largest commercial satellite operator, said profit for next year will be about half what analysts had forecast because of higher costs, sending the company's shares down 25%.

The warning came as PanAmSat signed deals with RealNetworks Inc. and US West Inc. to deliver information to Internet users.

PanAmSat expects to earn 75 cents to 85 cents a share in 2001, Chief Executive Doug Kahn said. It has been forecast to earn $1.49, the average estimate of analysts polled by First Call/Thomson Financial. PanAmSat shares fell $15.25 to close at $47 on Nasdaq.

The company said expenses will rise as its network of satellites is expanded to 25 from 20 by the middle of next year. Rising interest rates have also increased the company's payments on floating-rate debt, analysts said.

PanAmSat will spend $250 million over the next two years to equip its fleet of satellites for the Net/36 Internet service, which it expects to be operational in the U.S. during the third quarter.

Seattle-based RealNetworks agreed to deliver its software for playing music and video from the Internet over Net/36.

Denver-based US West, which provides telecommunications services in 14 Western states, agreed to use Net/36 for its subscribers.

PanAmSat, 81% owned by General Motors Corp.'s Hughes Electronics Corp. unit, has about $2.6 billion in debt, said a spokesman for the Greenwich, Conn.-based firm.

PanAmSat will also lease satellite capacity to Hughes' DirecPC network, a satellite Internet venture with America Online Inc.

On the New York Stock Exchange, shares of Hughes closed off $8.38 at $118.50 and US West closed up 69 cents at $74.38 RealNetworks fell $6.30 to close at $61.94 on Nasdaq.

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