BETHESDA -- Bruce L. Crockett loves to collect things -- toy trucks, Wizard of Oz memorabilia, models of Chinese junks, elephant statues.
Anything but satellites.
Mr. Crockett, president and chief executive of Comsat Corp., says that when he joined the company in 1980 the standard office decor for company executives was models of rockets and satellites.
L "I said I'm going to do things a little different," he said.
He has. Mr. Crockett's passion for collecting has changed a lot more than the look of his office. In recent years, the nation's leading satellite telecommunications company has assembled an eclectic group of businesses ranging from a movie production house to a satellite equipment manufacturer. Now, Mr. Crockett is in the market for a hockey team.
It's all been a little too eclectic for investors. Always wary of uncertainty, Wall Street has punished Comsat for Mr. Crockett's terrestrial ventures. From a 52-week high of $32.75, Comsat stock has lost more than one-third of its value, hitting a low of $19.375 last week. To some extent that reflects a general weakness in the telecommunications sector, but its price-earnings ratio of 11 is paltry, even by industry standards.
But according to Mr. Crockett, Wall Street might not be seeing the forest for the trees. "All of our businesses are profitable," the 50-year-old executive pointed out during a recent interview at the company's headquarters here.
Those ventures include the core business for which Comsat was founded by act of Congress in 1962 -- bringing the benefits of international space age telecommunications to people.
But in recent years, the company has discovered it has a certain flair for show business.
If you check into a Hilton or a Marriott hotel and decide to watch a movie in your room, it's brought to you by Comsat's On-Command Video subsidiary. If you're a professional basketball fan, you've probably watched the Comsat team -- better known as the Denver Nuggets.
And if your daughter rushes to the movie theater when "The Babysitter's Club" is released, she'll be seeing a Comsat production by way of Beacon Communications, the independent filmmaker whose acquisition was announced last month.
Last month, Comsat said it would seek a National Hockey League franchise to share the new $110 million arena it plans to build for the Denver Nuggets, the National Basketball Association team it already owned when Mr. Crockett took over as chief executive in 1992.
So what do these investments have to do with satellites?
Not much, and that doesn't bother Mr. Crockett at all. "We stopped being a satellite company several years ago," he said.
Well, not quite. Last year Comsat still earned about 85 percent of its $640 million annual revenues doing the types of tasks its name would suggest -- carrying overseas long-distance calls, beaming news feeds between continents, connecting supertankers with the home office, providing telephone links for remote Third World villages. It's just that Mr. Crockett does not like his company to be pigeonholed.
But what Wall Street can't pigeonhole, it often ignores -- contributing both to the paucity of analysts who follow the company and the low price of the company's stock.
On Nov. 1, Mr. Crockett called in the analysts who do cover Comsat and warned them not to judge the company by short-term quarterly earnings.
He told them that Comsat expects to see profits -- expected to come in at about $1.90 a share this year, up from $1.82 in 1993 -- grow by less than 10 percent next year as the company pours revenues into a variety of "growth opportunities."
Up to $200 million will go into international ventures, Mr. Crockett said, and another $50 million would be devoted to developing a laptop-sized device for international satellite communications. That's on top of the plans for the Denver arena and the push for a pro hockey franchise.
Unapologetic about ventures
Mr. Crockett was unapologetic about Comsat's growing role in the high-risk, high-reward sports and entertainment businesses. He told the analysts that side of the company will grow as a percentage of the company's revenues, though he still expects international communications to account for about 80 percent of the company's business even in 1999-2000.
He was equally unapologetic about plans to keep a lid on Comsat's 78-cent dividend, now about 45 percent of earnings.
"We won't cut the dividend but it will be a smaller percentage of our earnings than it has been in the past," Mr. Crockett said, indicating the payout will gradually decline to the 30s.
Richard Schelke, a telecommunications analyst with Smith Barney in New York, gives Mr. Crockett high marks for his leadership of Comsat, but he isn't quite convinced about its ventures into the unpredictable world of entertainment.
"You can just look at the stock price and draw your own conclusions," he said, suggesting that stockholders would be better off if Comsat spun off the entertainment businesses as a separate company.
Moody's Investors Service Inc. also questioned Comsat's direction -- noting the increased risk of its entertainment ventures -- and lowered its ratings on the company's debt from "stable" to "negative."
Mr. Crockett shrugs off such objections.
"There are some investors who would rather see us just be a communications company," he said. "We would hope over time to attract investors with different philosophies."
Mr. Crockett's message is one that's consistent with his long determination to change the culture of a regulated monopoly that was long driven by technology rather than the demands of the marketplace.
The Comsat president said he experienced an epiphany of sorts one day in 1986 in New Jersey when he and several other executives went to call on their largest customer, AT&T; Corp., which accounted for about 75 percent of Comsat's revenues.
They got lost.
"We didn't know where our largest customer lived," Mr. Crockett said.
At the time there was little need to. Comsat was a government-created monopoly, a kind of cross between NASA and Ma Bell. Its headquarters was in Washington's L'Enfant Plaza, nestled among such government agencies as the Postal Service, the Internal Revenue Service and the Department of Transportation. And while government no longer held an ownership stake, to some extent it took on the coloration of its neighbors.
"There was very little difference between Comsat and a government agency," said Mr. Schelke. Scott Chase, editor of Via Satellite magazine, called the Comsat of that era "a good old boys' club for retired Air Force joyboys."
Moved quickly as new CEO
That was already starting to change when Mr. Crockett was named chief executive in early 1992. Comsat was struggling to cope with a growing customer base for its satellite communications services, and its monopoly was eroding since the Federal Communications Commission decided in 1985 to let other satellite companies start launching their own "birds."
The new CEO moved quickly to reinvent the company. He changed the name from Communications Satellite Corp. to Comsat. Last year he moved the headquarters to the high-tech corridor along Interstate 270. And he cut the headquarters staff, which numbered 525 when he arrived at Comsat in 1980, to 84 out of an estimated 2,770 employees worldwide.
"They don't try to run everything from Bethesda," said Richard Wood, an analyst with Hanifen, Imhoff in Denver. "They hire good people and let them run the business."
Among the headaches Mr. Crockett inherited was the company's 50 percent share in the Nuggets, a team he described as "an embarrassment on and off the court." He also found the company saddled with Satellite Cinema, which was losing money left and right in the business of beaming movies down to hotels for in-room entertainment.
Rather than sell off his turkeys, Mr. Crockett taught them to sing.
In 1992, Comsat bought out its partners in the Nuggets and began a turnaround program that transformed a perennial loser into the Cinderella team in last year's NBA playoffs, where Denver forced the favored Utah Jazz into the seventh game of the Western Conference semifinals before succumbing.
TC The results left Denver basketball fans feeling as high as, well, satellites. Mr. Crockett said the team made a profit for the first time in its 25-year history.
Hotel video business
The hotel video business was saved by a low-tech solution.
Mr. Crockett said he put the business on the market, but found his best offer was from someone who offered to take it off Comsat's hands for free. So Mr. Crockett bought a competitor called On-Command Video, which transmitted movies from an automated rack of videocassette tapes located on hotel premises instead of using expensive satellite capacity.
Now Comsat's On-Command Video is the dominant player in its market niche, having won exclusive contracts with such large hotel chains as Marriott and Hilton to provide in-room movies. And the Video Enterprises division, which includes both the Denver Nuggets and On-Command, turned an $8.2 million loss in 1992 into a $10.2 million profit last year.
"If you don't think of yourself as a satellite company, that's half the battle in some of these things," Mr. Crockett said.
That doesn't mean Mr. Crockett is down on satellites. A former head of Comsat's World Systems division, he continues to see satellite communications as a growth business that will contribute the bulk of company revenues, which he expects to grow from $832 million this year to $960-975 million in 1995.
Comsat continues to be the largest owner and user of Intelsat, an international satellite cooperative that links major telecommunications providers around the world, and Inmarsat, which provides satellite communications to mobile users at sea and on land.
The company is also heavily involved in international ventures, including partnerships with Third World telephone companies that use Comsat's satellite resources to extend the telecommunications network to the village level without the expense of building a wired system. Other enterprises include Comsat Laboratories in Germantown, the leading research organization in communications satellite technology, and Comsat RSI, the product of Comsat's merger early this year with satellite equipment maker Radiation Systems Inc.
Mr. Crockett's orbital agenda is every bit as ambitious as his earthbound ventures.
Two years ago, he began a push to privatize Intelsat and Inmarsat, contending that the international conventions are unable to make the timely decisions required in the emerging competitive marketplace in satellite communications. While that struggle continues, Comsat is investing heavily in Inmarsat-P, a quasi-private arm of Inmarsat that is vying with two other ventures to become the leading provider of "seamless" worldwide mobile telephone service.
With new competitors continuing to enter the satellite communications market, Comsat's current 90 percent-plus market share is no longer assured. And after the FCC loosens its regulatory role in 1997, satellite connections to and from the United States could become a commodity business with minuscule margins.
But Mr. Crockett has a plan in mind. "Almost all of our communications investments are international, and they're there on purpose," he said.
That's where Mr. Crockett sees the convergence between entertainment and satellites.
After losing an estimated $200 million on an ill-timed venture into satellite television in the late 1970s and early 1980s, Comsat has shied away from investing in the emerging direct broadcast satellite (DBS) television business in the United States. But it's // not ruling out a second try in foreign markets.
And what are two of America's hottest export products? Movies and NBA basketball.
After almost four years in the top job, Mr. Crockett believes the job of turning Comsat into an entrepreneurial company is virtually accomplished.
So what next?
"Now we've got to reinvent ourselves again," he said with a grin.