Boeing has decided to exit the high-speed broadband communications connectivity markets following completion of a business and market analysis of Connexion by Boeing.Boeing will work with its customers to facilitate an orderly phase out of the Connexion by Boeing service.
“Over the last six years, we have invested substantial time, resources and technology in Connexion by Boeing,” said Boeing Chairman, President and CEO Jim McNerney. “Regrettably, the market for this service has not materialized as had been expected. We believe this decision best balances the long-term interests of all parties with a stake in Connexion by Boeing.”
As initially disclosed in the company’s second-quarter 2006 financial results on July 26, Boeing now expects to recognize a pre-tax charge of up to $320 million, or $0.26 per share, in the second half of 2006, of which approximately $290 million will be taken in the third quarter and the balance in the fourth quarter. The company also expects a benefit to earnings of approximately $0.15 per share starting in 2007 without further investment in Connexion. The company will update its financial guidance when it releases third quarter results on October 25.
The charge relates to writing down certain assets, payments of early termination fees and other costs related to shutting down the service. Boeing expects the majority of Connexion employees will find other jobs within the company.
Boeing acknowledged it was reviewing the Connexion business on June 26. This effort included an assessment of the market and discussions with existing customers and potential new business partners.