There was one thing evident about Wall Street’s wild ride Friday: compared with the stocks of the newcomers to the space industry, so-called traditional space stocks were a safe haven in an increasingly tempestuous market environment.
With U.S. blue chips dropping to all-time lows, industry giants such as Lockheed Martin and Boeing fared much better than their younger counterparts who are involved in such things as building the high-speed and wireless networks of the future.
Lockheed Martin shares closed down a mere 4.34 percent to $20.68. Industry giant Boeing fell slightly, down 4.39 percent to $35.37. But the fledgling telecommunications stocks took a beating, falling an average of 25 percent.
"The reason the aerospace stocks did well is that [their stock prices] were very depressed," said Paul Nisbet, an analyst at JSA Research in Providence, Rhode Island. "Investment in dot.coms took away money from the whole group and they became extremely undervalued."
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Analysts are becoming increasingly aware of how the space industry is being redefined, cutting across a broad spectrum of sectors such as telecommunications, information technologies, electronics, aeronautics, life sciences and healthcare. And one area in particular seems to be pulling ahead of the pack.
"If companies are looking for markets to grow in, the telecommunicationsmarket dwarfs anything that has to do with aerospace."
This decade, dozens of low and high earth orbit satellites, costing billions of dollars, have been blasted into space as the U.S. satellite industry began shifting its attention from military to consumer and business services. In 1997 there was a
dramatic leap in the number of satellites propelled into space with 119 launched worldwide -- an 80 percent boost from the previous year. By 1998 the number increased to 128, signaling a trend in the satellite communications industry.
"If companies are looking for markets to grow in, the telecommunications market dwarfs anything that has to do with aerospace," said Marco Caceres, senior space analyst at market researcher Teal Group.
In the past few years, companies such as
Globalstar Telecommunication, Echostar Communication, Orbital Sciences, CD Radio and American Mobile Satellite have raised large sums of money in both bonds and stock offerings to put satellite constellations in place.
Despite the failure of the
Iridium constellation and the trouble brewing in the Globalstar camp, Caceres predicts that this trend will continue. A large portion of the new broadband multimedia satellites in the Spaceway, Skybridge and Teledesic systems will be launched, he said.
And now that it seems that these systems are here to stay, industry biggies such as Lockheed and Boeing are trying to figure out what they are going to do in the future. "They are deciding if they want to concentrate on building hardware or operating those systems once they are in orbit," he said.
JSA analyst Nisbet agrees.
"Lockheed, Boeing, Loral and Orbital are increasingly getting into the communications business," Nisbet said. But, while Boeing and Orbital will likely stick to the more traditional business of making hardware, Loral and Lockheed will probably move in the direction of communications services, he said.
What does this mean for the long-term prospect of aerospace stocks now that they are sharing the road on Wall Street?
"I think aerospace companies are well-suited for the business-to-business role on the internet," Nisbet said. "Aerospace firms could be successful because of the established products they have behind them."
On Monday, the technology-heavy Nasdaq had its biggest one-day point gain ever, rising 217.67 points to close at 3,538.96 as investors selectively picked top technology companies that have a pattern of earnings growth while shunning those that can only promise future profits. The Dow Jones industrial average gained 276.74 to 10,582.51.
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