"For the commercial launch business, in general, there is just very little launching to do," he said. "They know what's in the pipeline. The only way to win launch contracts is to bid them below cost."

The move shouldn't hurt Boeing because they "aren't exactly giving up a large amount of business, but they are reducing a significant amount of cost," Nisbet said. "You have a staff that's really overhead if they aren't doing anything."

Launches, he added, are a very expensive endeavor, costing anywhere from $55 million to possibly as much as three times that for larger payloads.

Tight market

Boeing's main U.S. competitor in the rocket-launch business, Lockheed Martin Corp., shouldn't see a big boost in business, Nisbet said.

"Lockheed isn't the only game in town," he said, adding that Arianespace is aggressively marketing its Ariane rockets, and International Launch Services also is marketing Russian Proton rockets.

"There is a lot of capacity, but little to launch," Nisbet said.

Cellular phones, the Internet and fiber-optic lines have encroached on satellite territory in recent years, leaving satellite makers little to transmit in many parts of the world, he said.

"The market that was once there for satellites is simply quite a bit weaker," he said.

Lockheed Martin has a commercial communications satellite launch on an Atlas 5 scheduled for Thursday from Cape Canaveral.

But the last commercial Delta launch from Cape Canaveral was on Nov. 20, 2002. The Delta 4 rocket carried a W5 telecommunications satellite for the Paris-based satellite company Eutelsat.

The most-recent Delta launch for a government contract was on July 7, when a Delta 2 Heavy rocket lofted the Mars Rover Opportunity toward the Red Planet.

Launches at sea

Robert Villanueva, a Boeing spokesman who works with the company's expendable-launch systems, said most of the company's commercial-launch business now would be done from Sea Launch -- a floating launch platform near the equator in the Pacific Ocean -- using Russian-made Zenit-3 SL rockets.

Sea Launch's floating platform allows rockets to use the Earth's rotation at the equator for greater carrying capacity than they would have at other locations.

However, if commercial customers want to launch using a Boeing Delta rocket, the company would accommodate them, Villanueva said.

"We're still making all of our Delta vehicles available for commercial customers if it's conducive for us to do so," Villanueva said.

He said Boeing had no firm commercial launches scheduled in the next few years, but is negotiating with potential customers for satellite launches in 2009.

In a conference call to analysts Tuesday morning explaining the company's strategy for commercial launches, Boeing Chief Executive Phil Condit cited a "terrible marketplace," along with some technology and performance problems.

Boeing will focus exclusively on the U.S. military as a customer for its Delta 4 satellite launches.

Weak division

The announcement culminates several years of struggles at Boeing's satellite operations, the weak link in its expanding and otherwise-prosperous defense and space business.

It also reflects another notable setback for a company that has relied on its defense and space operations to enable it to steer profitably through the turbulent commercial airplane environment since the 2001 attacks.

Besides the air-travel slump, Boeing has been struggling with a difficult satellite market since it acquired the satellite-making holdings of Hughes Electronics Corp. in October 2000.

Boeing shares were down $1.14, or 3.3 percent, on Tuesday to close at $33.44 on the New York Stock Exchange.

The satellite business, Condit said, is the "only exception" to a strong Boeing defense portfolio. Company executives also said the charge shouldn't alter its cash situation since the costs will be spread out over seven years.

Boeing announced Tuesday it will take a pretax charge of $1.1 billion, or about 87 cents a share, when it reports second-quarter earnings July 23.

Boeing said about $835 million, or 66 cents a share, of the charge is related to its Delta 4 satellite program, where the company's higher prices have compounded the problem with fallen demand. The company reduced by nearly half its estimate of long-term demand for the Delta 4 launch vehicle.

"We did not want to have a business plan that was dependent on our ability to capture a market that we think, one, has been reduced and, two, we're not competitive in," said Jim Albaugh, president and chief executive of Boeing Integrated Defense Systems.

"We will continue to test this marketplace, and if and when there is a shakeout in this marketplace, and people will pay a premium for a reliable launch vehicle, we will re-enter."

Another $265 million, or 21 cents a share, of the charge will reflect the loss to be reported by Boeing Satellite Systems for the quarter.

Albaugh said the problems in the satellite division, based in El Segundo, Calif., are unrelated to other areas of Boeing's growing defense business, which is expected to generate more than half of the company's revenue this year for the first time.

Boeing's annual earnings fell to $492 million last year from $2.83 billion in 2001.

ILS moves on

Fran Slimmer, a spokeswoman for International Launch Services, said the company would pursue business as usual. ILS is a joint venture of Lockheed Martin and Khrunichev State Research and Production Space Center to market the Atlas and Russian Proton rockets.

"As far as ILS is concerned, nothing has changed," she said. "We continue to market our launch services to government and commercial customers worldwide."

ILS launches an average six to nine satellites a year, with roughly 30 percent of them related to government payloads and 70 percent commercial.

Slimmer agreed with Nisbet that the commercial-satellite market is tight now, but she added that regardless of that, her company is "committed to 100 percent mission success. We are definitely excited about watching the launch (Thursday) of the Atlas 5, the third since it was introduced 11 months ago."

Chicago-based Boeing is the largest manufacturer of satellites, commercial jetliners and military aircraft with ties to missile defense, human spaceflight and launch services.

In Brevard, Boeing has a long history of work with defense. The company's work on the Space Coast includes payload-processing and launching of Global Positioning System satellites used by the military and launched from Cape Canaveral Air Force Station.

Boeing's commercial and military launches on the Space Coast are a more than $1 billion-a-year business, but only a small part of the company's total assets.

Boeing soon will celebrate its 300th Delta rocket launch -- for an Air Force contract -- on Aug. 3, and it will be from Cape Canaveral.

The Delta program began in 1960 when NASA modified the Thor intermediate range ballistic missile. The rocket has grown since then, with Delta 2 launches beginning in 1989, and the first Delta 4 launched in 2002.

The Associated Press contributed to this report.

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