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Boeing Nears Intelsat Satellite Deal
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Post Boeing Nears Intelsat Satellite Deal - 31-March-2009, 05:56

After struggling for years, Boeing Co.'s commercial-satellite manufacturing business appears poised for a lift by snaring what is likely to be a multisatellite order valued at more than $400 million from Intelsat Ltd., according to people familiar with the matter.

While no final agreement has been signed, negotiations between Boeing and Intelsat, which has the world's biggest commercial satellite fleet, have been making steady progress over recent months, these people said. Barring some last-minute snag, a contract for as many as four satellites with an estimated total value between $400 million and $550 million is expected to be signed within the next few weeks.

The anticipated deal, reported by industry publication Space News, would help rejuvenate Boeing's satellite-making unit, which has barely broken even in recent years, significantly cut its work force and largely shunned the commercial arena. Combined with U.S. government awards that were delayed and others that Boeing lost, the Chicago aerospace giant's satellite factory in El Segundo, Calif., could face the threat of further reductions. Boeing in the past even had preliminary discussions with rivals about a potential sale or merger involving the unit, according to industry executives.

A firm contract with Intelsat would provide Boeing with an immediate financial and symbolic boost. It also could have longer-term ramifications by changing some of the dynamics of the roughly $90 billion-a-year global industry that manufacturers and provides voice, data and imaging services using commercial satellites.

Intelsat is slated to be the first customer for a family of satellites Boeing has been developing since the middle of the decade that are smaller and less expensive than its current versions, but comparable with models already offered by many rivals.

Representatives for Boeing and Intelsat declined to comment over the weekend. A spokeswoman for Loral Space & Communications Inc., believed to be the other bidder still talking with Intelsat, also declined comment. Intelsat previously had confirmed that it was seeking bids for a number of new satellites as part of a capital budget slated to top $525 million this year.

An Intelsat contract would demonstrate that Boeing's satellite unit has managed to overcome a string of quality-control lapses and budget overruns. It also would catapult Boeing into a market segment in which it hasn't been competitive since the beginning of the decade. A victory also eventually could improve Boeing's ability to compete against Loral, Lockheed Martin Corp. and European satellite-makers, according to industry officials.

Regardless of the size of the Intelsat deal, industry officials said the latest development signals Boeing's determination to jump back into commercial satellites. Government orders account for about 80% of Boeing's current satellite business and company executives previously had said they were only interested in vying for the largest, most complex commercial satellites. But now, with the U.S. Defense Department's space budget under pressure, commercial opportunities seem more promising than they once had.

For Intelsat, which is based in Washington, D.C., the move is designed to accomplish the twin goals of diversifying its satellite providers and ordering multiple spacecraft as ways to reap cost and operational benefits. Similarly, Intelsat and other operators with world-wide capacity are looking to use Chinese rockets to diversify launch providers.
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