NEW YORK -- Motorola Inc. said yesterday that it will end its proposed $12.9 billion Celestri satellite project and invest about $750 million in rival Teledesic LLC.
Motorola, which is abandoning Celestri less than a year after announcing the ambitious project, will get a 26 percent stake in closely held Teledesic.
The investment includes an undisclosed amount of cash and the value of Celestri's design and development work that will be redirected to Teledesic.
By combining with Motorola, Teledesic's backers -- Microsoft Corp. Chairman Bill Gates and cellular phone pioneer Craig McCaw -- are eliminating a competitor and hope to grab a bigger piece of the satellite communications market. Motorola is eliminating billions of dollars in costs for Celestri and will become Teledesic's prime contractor.
"There were a lot of people chasing a limited amount of market," said Scott Wright, an analyst at Fahnestock & Co. "Given Motorola's own operating problems, it makes sense."
Teledesic plans to provide services used to link computer networks, high-speed Internet access and video conferencing anywhere in the world through a network of 288 satellites that are scheduled to begin service in 2003. Teledesic will target suburban and rural business customers who don't have access to fiber lines.
"We see broadband as the largest market opportunity in the coming decade," said Teledesic spokesman Roger Nyhus.
Motorola had planned its Celestri global network to provide voice, data and video communications to phone companies, businesses and telecommuters, in direct competition with Teledesic. In June, Motorola said it expected the Celestri system to generate annual revenue of $18 billion by 2005 to 2007.
Motorola doesn't expect to take any charges for ending the Celestri project, said Motorola Chief Executive Christopher Galvin in a conference call.
Teledesic and other satellite ventures are aiming to capture a chunk of the global market for telecommunications that's expected to double to $1 trillion in 10 to 15 years. Seattle-based Boeing Co., the world's largest aerospace company, and Matra Marconi Space, a satellite manufacturer, will become partners in the Teledesic project.
Shares in Schaumburg, Ill.-based Motorola rose 68.75 cents yesterday to $55.4375. Boeing rose 18.75 cents to $48.1875.
Motorola has disappointed investors with lower earnings in five of the last eight quarters and recently lowered its expectations for semiconductor growth.
Pub Date: 5/22/98