Boeing today announced that a detailed business and market analysis of Connexion by Boeing is complete, and the company has decided to exit the high-speed broadband communications connectivity markets.
‘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 materialised 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 recognise a pre-tax charge of up to $320m, or $0.26 per share, in the second half of 2006, of which approximately $290m 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.