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PanAmSat's sky falls
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October 13, 1998: 2:30 p.m. ET
Satellite provider's shares tumble nearly 21% as analysts hedge bets
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NEW YORK (CNNfn) - PanAmSat Corp., the world's largest non-government provider of satellite services and a dominant force in the U.S. pager market, stumbled badly on Wall Street Tuesday after an analyst lowered his 1999 price target for the company to $50 from $60.
Shares of the Greenwich, Conn.-based PanAmSat (SPOT) fell nearly 21 percent, plummeting 7-9/16 to 29-3/16 on the Nasdaq after Morgan Stanley analyst Marc Nabi downgraded his 1999 outlook to account for "the market's intolerance of risk."
Despite the revision, Nabi kept his "outperform" rating and his future earnings projections for 78 cents a share in 1998 and $1.31 in 1999. A company statement described Nabi as "positive" about the firm's long-term prospects.
In a related development, Credit Suisse First Boston cut its rating for the company to "hold" from "buy."
Both statements came after, PanAmSat, which is 81 percent owned by General Motors' publicly-traded Hughes Electronics unit, released its third-quarter financial results. PanAmSat reported a 9.5 percent increase in quarterly sales, to $186.5 million from $170.3 million in the year-ago period.
On Monday, PanAmSat -- whose 17 satellites currently cover 98 percent of the Earth's service -- announced it had purchased three new satellites from Hughes Space and Communications Co. -- the Galaxy IV-R, Galaxy X-R and a new international orbiter.
Costs to build, launch and insure the orbiters, PanAmSat said, are expected to range from $200 million to $250 million. The company said it had chosen French launcher Arianespace to provide two launches next year.
PanAmSat's market pratfall Tuesday marked the second major setback for the firm this year as it juggles an ambitious agenda that includes providing satellite TV programming to more than 120 million households each day.
Earlier this year, millions of pager customers across the United States temporarily lost service when a PanAmSat satellite got lost in the cosmos. The firm handles about 90 percent of U.S. pager traffic.
Hughes Electronics attributed a 20 percent drop in third-quarter profits Tuesday to widening losses at its DirecTV business and intensifying competition from cable and satellite operators.
Hughes also said PanAmSat had scrapped a planned launch next Spring of its Galaxy XI telecommunications from Sea Launch, an ocean-based platform. Sea Launch is part of a consortium that is managed and partly owned by Boeing.
Boeing reportedly made a last-ditch bid to persuade PanAmSat to use Sea Launch by offering to launch a dummy payload first.
PanAmSat plans to launch eight new satellites in the next 15 months.
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