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Boeing Gets DirecTV Order for 3 Satellites

September 09, 2004|Peter Pae | Times Staff Writer

After going a year without landing a new commercial satellite order, Boeing Co. hit it big Wednesday when DirecTV Inc. placed an order for three to provide high-definition TV programs across the U.S.

The order potentially is worth more than $750 million to Boeing, analysts said, and represents one of the biggest deals since the commercial satellite industry went into a tailspin four years ago after several high- profile telecommunication companies collapsed.

"In this market environment, an order for three is huge," said Marco Caceres, a space analyst at Fairfax, Va.-based Teal Group. "No one has gotten an order like this in years."

Boeing was once the world's largest satellite maker. Last year it cited the weakest satellite market in decades when it took a $1.1-billion charge, and in recent years it has slashed the workforce at its Satellite Systems unit in El Segundo by nearly half to about 5,000.

The DirecTV order is "great news," said Dave Ryan, the general manager in El Segundo.

The business struggled after the failure of elaborate sat- ellite communication systems planned by Teledesic and Iridium. Boeing and rivals Lockheed Martin Corp., Loral Space & Communications Ltd. and Alcatel all suffered.

Although increased orders for spy and military communication satellites helped Boeing offset the downturn, its annual deliveries of commercial satellites dwindled to a handful, a sharp contrast to the late 1990s when Boeing rolled out a satellite every month.

Wednesday's order for the bus-sized satellites would allow DirecTV to provide more than 1,000 high-definition channels to customers in all 50 states, DirecTV said.

Boeing expects to deliver the first two satellites in 2007. A third satellite would be used as a backup. A satellite can cost $100 million to $250 million, and a more sophisticated model can take 18 months to build.

DirecTV, the nation's largest pay satellite TV service, is controlled by Rupert Murdoch's News Corp. It had been a longtime Boeing customer until last fall, when it purchased two satellites from Loral. DirecTV switched to Loral after some of its Boeing spacecraft malfunctioned. Boeing said those problems had been resolved.

Although the DirecTV order doesn't yet signal a recovery for the commercial satellite industry, analyst Caceres said, the deal may bolster Boeing's prospects for additional orders: "The more important thing is that [Boeing is] back as a supplier to DirectTV, which is seen having the most growth potential."

The deal is the latest among a spate of commercial and military contracts won by Chicago-based Boeing in recent months.

On Wednesday, Boeing said it had won a $54-million contract to begin developing the next-generation radio system for the Air Force and the Navy. Much of the work will be done at a Boeing facility in Anaheim.

Wall Street has taken notice. Bolstered by an improving picture for its commercial jetliners and increased military orders, shares of Boeing have risen on the New York Stock Exchange in recent weeks to their highest level since before 9/11. Boeing on Wednesday hit a 52-week high of $54.32 before closing at $54.05, up 8 cents for the day.

The aerospace company is the largest private employer in Southern California, with about 36,000 workers.

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