Wall Street reacted with only mild interest yesterday as Comsat Corp. reported solid earnings for the fourth quarter of 1998.
Stock in the Bethesda telecommunications company climbed a modest 68.75 cents a share to $29.6875 yesterday as investors paid more attention to the company's pending merger with Lockheed Martin Corp.
"The most important development," said analyst Tom Burnett of Merger Insight in New York, "is that they set a date for their shareholders to meet on the Lockheed proposal."
June 18 is the date Comsat set for its annual meeting, during which shareholders will vote on whether to accept Lockheed Martin's $3.16 billion buyout offer.
"I think that's very important because the price of Comsat stock is dictated totally by the market's hope or fear that the Lockheed transaction will be completed," Burnett said.
Comsat's fourth-quarter net income was $11.9 million, or 22 cents per diluted share, on revenue of $162.3 million. The overall sales figure was up 14.8 percent from the $141.4 million in revenue reported for the corresponding portion of 1997, for which the company reported a net loss of $27.9 million, or 55 cents a share.
For all of 1998, Comsat's net income was $26.4 million, or 50 cents a diluted share, up from a net loss of $64.4 million, or $1.29 a share, for 1997. Last year's revenue of $616.5 million was up 9.6 percent from $562.6 million the year before.
Comsat unloaded several money-losing businesses last year in the entertainment and manufacturing fields, and that improved last year's results.
Losses in Comsat International and costs associated with the Lockheed Martin merger pushed income from continuing operations down to $26.4 million last year from $28.6 million in 1997.
"Overall revenues are up nicely but these guys have always had a cost problem; they've never been able to earn a lot of money," Burnett said.
Comsat President and Chief Executive Officer Betty C. Alewine noted yesterday the many steps the company is taking to remake itself, including steps to control costs and find new customers as international markets suffer from economic woes.
Comsat is also pursuing the privatization of two international communications satellite organizations -- Intelsat and Inmarsat -- in which the Bethesda company is the largest stakeholder.
Last year "was an extraordinary year for Comsat, as the corporation achieved an ambitious agenda of divestiture, deregulation and progress toward privatization of Intelsat and Inmarsat," Alewine said in a news release. "These actions -- capped by our proposed merger with Lockheed Martin Corp. -- are designed to deliver increased value to shareholders, customers and employees."
It will take both regulatory approval and an act of Congress to bring about the merger. Burnett said he rates those odds as 65-35 in favor of the deal, "but not higher than that."
Pub Date: 2/23/99