Lockheed Martin Corp. said yesterday it has agreed to sell its satellite telecommunications services business to Intelsat Ltd. for $90 million.
The sale of the business, called Comsat General, nearly completes the Bethesda defense contractor's dismantling of an expensive foray into commercial satellite services. Comsat General sells satellite services to business and government and posted revenue of about $150 million last year.
Intelsat, one of the world's biggest satellite companies, said the acquisition will expand its ability to offer communications services to governments. "The U.S. and other NATO country governments currently rely on commercial satellite capacity for a substantial portion of their mission-critical communications and customized services. We believe that the acquisition . . . will solidify Intelsat's competitive position in this important market," Intelsat chief executive Conny Kullman said in a news release.
Lockheed Martin is one of Intelsat's largest shareholders, with about a 24 percent stake. Under the terms of the deal announced yesterday, up to $40 million of the purchase price could come in stock instead of cash. Intelsat also bought an Atlas rocket from Lockheed Martin yesterday for a satellite launch later this year. The companies did not disclose the cost of that purchase.
The sale of Comsat General leaves Lockheed Martin with only one major business unit remaining from its purchase of Comsat Corp. in 2000 -- Lockheed Martin Intersputnik, a commercial satellite over the Indian Ocean. Spokesman Jeff Adams said Lockheed Martin is "actively" trying to sell that business as well.
The world's biggest defense contractor tried to diversify into telecommunications in the late 1990s when that market was booming and military sales were flat. It spent two years and $2.6 billion acquiring Comsat Corp., fighting for approval from Congress and the Federal Communications Commission to buy what had been a quasi-public entity formed at the very birth of satellite communications in the 1960s.
But the dot-com crash and the expansion of fiber optics contributed to a collapse in demand for satellite services. In late 2001, Lockheed Martin took a $1.7 billion charge to write down the Comsat purchase and has been selling off the components of the company ever since.
Yesterday's transaction "is consistent with our intent to focus on core businesses and monetize valuable assets that are not elements of our long-term strategy," Lockheed Martin financial strategist Jeffrey MacLauchlan said in a news release. The company's focus now is on defense, government information technology and homeland security.