Motient Corp. posted another slow quarter last week, showing total revenue of $23.7 million on a net loss of $65.5 million, and warned that the current economic slowdown has begun to affect the company’s subscriber totals and could continue to do so.
“Current IT (information technology) spending patterns are not in our favor,” said Walter V. Purnell Jr., the company’s president and chief executive officer.
Purnell said Lucent Technologies Inc. reduced its order for Research In Motion Ltd.’s BlackBerry device by 1,250 units due to the company’s downsizing, a move spurred by the slow economy. Purnell said it was the first hit Motient has taken due to the economy, and warned that more could be on the way.
Even with the reduction in orders, however, Motient’s total subscriber numbers were higher compared with previous quarters. The company recorded about 31,500 new subscribers, mostly due to wireless e-mail sales of the company’s eLink and RIM’s BlackBerry-but Motient has begun to show a dangerous pattern of diminutive revenues and growing losses.
Last year, Motient posted revenues of $22 million in the first quarter and $26 million in the second. This year, Motient showed $23.4 million in the first quarter and only $300,000 more in the second. The company’s losses, however, are quickly growing, from just $4 million in the first quarter of last year to almost 17 times that in the second quarter of this year.
In order to battle its current financial problems, Motient recently acquired Internet software company Rare Medium Group, which carries with it a significant amount of cash. The combined company, which will benefit from the $134 million in cash Rare Medium maintained through the end of the first quarter, is expected to have service revenues of more than $100 million and will almost double Motient’s employee base to about 1,000. Motient executives said the company took out its second $25 million loan from Rare Medium and that the merger is continuing as planned.
“On the liquidity front, we’re on schedule,” Purnell said. “The proposed merger will provide substantial funding,” and is scheduled to close in September.
Looking to the future, Purnell said Motient’s sales contracts continue to grow and that the company is “cautiously optimistic” about the second half of the year.
Analyst firms echoed Purnell’s cautiousness. Bear Stearns wrote in a research note that Motient’s liquidity remains a concern, and is greatly reliant on the company’s ability to close its merger with Rare Medium.
Motient’s stock price remained generally unchanged after it released its earnings. The company’s stock fell from about $1 per share at the beginning of last week to about 75 cents on Friday.
