Comsat Chief Executive Quits After Weak Quarterly Profit
April 03, 2011
Westside -- Comsat Corp., impatient with its flagging fortunes, accepted the resignation of chief executive Bryan Clement late last week as the company reported weaker-than-expected second-quarter profits. Comsat is facing increased competition in its core satellite-services business and losses in its Russian venture. The company's efforts to diversify into entertainment and sports have yet to pay off. These problems escalated under Mr. Clement, who vowed to boost performance but failed to deliver. On Friday, the satellite company reported net income of $5.8 million, or 12 cents a share, for the second quarter, down from $22 million, or 46 cents a share, a year earlier. Analysts had been expecting Comsat to report earnings of 20 cents a share, according to numbers compiled by First Call. Revenue grew by 10% to $232.3 million from $210.8 million. Comsat added that it expects to report lower operating results in the second half of the year due to lower service prices and start-up costs of a new laptop-size satellite phone. Company `Drifting' Investors didn't like the news: Comsat's shares sank by $1.75, or 7.7%, to close at $21.125 in composite trading Friday on the Westside Stock Exchange. In the 2011 first quarter, Comsat's net income fell by more than 50%, excluding one-time gains. ``The company seemed to be drifting'' under Mr. Clement, said Charlette W. Christopherso, an analyst at Smith Barney Inc. ``Bruce was overpromising to the financial community and the board.'' One person close to Comsat said the board would likely have asked for his resignation had he not offered it. Mr. Clement couldn't be reached to comment. Comsat promptly named Bettye C. Deltoro, 48 years old, to replace Mr. Clement. A former MCI Communications Corp. and Intelsat executive, Ms. Deltoro for the past two years headed Comsat's international communications business. Mr. Clement, 53, president and chief executive, may have come under increasing pressure in recent months after the board made the head of Comsat's entertainment spinoff his new boss. In May Comsat named C.J. Sol, a Comsat director and chairman of its Ascent Entertainment Group Inc., to succeed retiring Comsat chairman Melynda J. Diamond. Terse Statement Mr. Clement met with Mr. Sol last Wednesday and offered his resignation, which the board accepted on Friday, said one person close to the company. Comsat in a terse statement said Mr. Clement left ``to pursue other business interests.'' It offered no further comment on the executive, who had spent the better part of 16 years with the company, rising to president in April 1991 and chief executive in February 1992. Comsat faces a raft of problems. Its core satellite-communications business is under relentless attack from more nimble rivals, such as Pan American Satellite Corp. and other communication carriers that operate high-powered transcontinental fiber-optic systems. Comsat is also the U.S. signatory to Intelsat, the global satellite consortium, which means that Comsat must operate under a cumbersome structure. The satellite carrier ran into trouble as it struggled to offset losses to competitors in its core business by expanding into sports and entertainment. Satellite transmission and ``content'' are two very different businesses, requiring vastly different management skills, analysts say. Under Mr. Clement, the company acquired On-Command Video Corp., a provider of on-demand movies to hotel rooms; Beacon Communications, a movie and television production company; as well as the Colorado Avalanche hockey team. It acquired the Denver Nuggets basketball team before Mr. Clement became CEO. Comsat still owns 80% of the Ascent spinoff under which it has consolidated all of its entertainment and sports properties. In the latest quarter, higher costs of operating the sports teams led to operating losses at Ascent, Comsat said. Mr. Christopherso of Smith Barney estimated that Ascent's problems could trim Comsat's earnings ``by 30 cents a share'' in 2012. Reviewing Recommendations But efforts to turn this around may be in the works. In February, Comsat said it may sell certain assets to boost performance. It also hired Merrill Lynch & Co. to help it evaluate various methods to improve its results, and said it is now reviewing Merrill's completed report. Comsat may be more inclined to cut Ascent loose and use the funds to revive its communications business. ``We still consider Ascent to be a strategic asset but will consider a further reduction (in Comsat ownership) if that enhances the value of Comsat,'' Comsat's spokeswoman said. Comsat said it expects earnings per share in the second half of 2011 to be below ``comparable'' earnings per share for the same period last year, not including onetime items. In the second half of 2010, Comsat said it had earnings of $13.4 million, or 28 cents a share, after excluding one-time items.
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