Hughes to Focus on Broadband Business; Sell Satellite Operations

Hughes Electronics Corp. (El Segundo, CA) plans to make major changes in its corporate structure and business mix that are designed to sharply focus the company's resources and management attention on its high-growth entertainment, information, and business communications services businesses.

Included in the actions is the sale of the company's satellite systems operations, a strategy to discontinue certain wireless manufacturing activities and focus on wireless broadband opportunities. Also, the company has appointed two top-level executives to concentrate the company's service operations on two distinct customer groups—individual consumers and business-to-business "enterprise" customers.

"These strategic moves accelerate the transformation of Hughes into a highly focused entertainment and data information services and distribution company,'' said Michael T. Smith, chairman and CEO of Hughes. "We will now be in a stronger position to fuel the growth of our high-growth service businesses, focus more intensely on customer needs, and devote resources to the integration of new broadband and interactive services.''

Satellite Operations
Boeing will acquire the Hughes satellite systems businesses in an all-cash transaction of $3.75 billion. Included in the acquisition is Hughes Space and Communications Co. (communications satellites); Hughes Electron Dynamics (electronic components for satellites); and Spectrolab (solar cells and panels for satellites).

The units have a combined workforce of about 9,000 employees, primarily in the Los Angeles area. The operations are expected to have 1999 revenues of $2.3 billion, and currently have a backlog of more than 36 satellites valued at more than $4 billion. The transaction is subject to regulatory and government review, and is expected to close by mid-year.

Investment Shifted to Broadband
At the same time, Hughes plans to narrow the focus of its wireless business at Hughes Network Systems (HNS; Germantown, MD). As a result of this decision, HNS' wireless business will focus on its broadband point-to-multipoint product line and discontinue its mobile cellular and narrowband local loop product lines.

HNS will fulfill its outstanding contractual obligations for these discontinued product lines. Resulting from these actions, Hughes will record a fourth quarter pre-tax charge of approximately $275 million.

Edited by Ellen Jensen