, the Boeing Company and Hughes Electronics released fourth quarter earnings reports Wednesday, with each company moving in opposite directions in commercial space.
Boeing is moving forward as a one-stop shop for every commercial space need. Hughes is aimed towards communications and entertainment services for home and business, getting away from manufacturing and production of satellites.
Boeing announced net earnings of $662 million for the fourth quarter 1999, up 42 percent from the same period in 1998. Hughes reported a $226.7 million loss for the quarter, caused by a $272 million charge due to a massive reorganization of its satellite television and communications division.
. For Hughes, it signaled a focus on space-based consumer and business services, a step advanced by its sale to Boeing of its less profitable manufacturing operations.
Boeing’s space and communications business earnings were $415 million for 1999, compared to $218 million in 1998. Total revenue from space sales were $6.8 billion, down one percent from the previous year. In fourth quarter 1999, space generated earnings of $123 million, on revenues of $1.9 billion. This compared to earnings of $91 million on sales of $1.7 billion in 1998’s last quarter.
Boeing Chairman and CEO Phil Condit pointed to three major space achievements during the year as indicators of Boeing’s new emphasis on commercial space.
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, adding a large spacecraft manufacturing business to its space operations. Rival Lockheed Martin had previously held the contract for years.
And lastly, Condit pointed to the Hughes satellite building acquisition as a major step in space business.
"Last week, we announced a major strategic step toward solidifying our position as the leader in integrated, space-based information and communications," Condit said Wednesday. He suggested the addition created "substantial synergies" between the two firms and said it opened "new marketing opportunities" for Boeing in commercial space.
Hughes Chairman Michael Smith said the reorganization of his company’s space services business that caused the $226 million fourth quarter loss would ultimately strengthen Hughes.
"We’ve begun the new century as a company that is sharply focused on our high-value, high-growth entertainment and business communications," Smith said Wednesday.
The sale of its manufacturing business to Boeing for $3.75 billion will help Hughes re-focus itself on consumer and business services. Smith said the service end would be more lucrative to Hughes’ future growth. Revenue of its direct-to-home satellite broadcast service more than doubled in 1999, to $1.2 billion in sales, mostly from U.S. customers.
Analysts agreed that the results and the merger were signals of each company’s longer-term strategies. "Boeing was missing the big manufacturing capability that Hughes will provide," said space analyst Marco Caceres for the Teal Group. "The fit is just perfect, for each had something the other needed."
For Hughes, it was $3.75 billion to use in its reorganization.
"The quarter results are just further evidence," Caceres said, "that it’s a match made in heaven."
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