Gilat Hit by Delays in U.S. Government Contracts

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PARIS — Satellite broadband ground hardware manufacturer Gilat Satellite Networks on Aug. 12 reported lower revenue and profit, saying expected U.S. government contracts had not materialized and that commercial business was also slow in coming.

In a conference call with investors, Gilat Interim Chief Executive Dov Baharav said the second half of this year, particularly the end of the year, should see a return to growth.

Petah Tikva, Israel-based Gilat also announced it had entered into a partnership with a Chinese ground hardware builder to provide network segments and user terminals for China’s first Ka-band high-throughput satellite, Chinasat 16.

Under the partnership, with Space Star Technology Co. Ltd. of Xi’an, Gilat will provide its SkyEdge II-c hardware for the ground network. Chinasat 16 had been scheduled for launch in 2017. Star Technology is part of the China Aerospace Science and Technology Corp.

It was not immediately clear whether the 2017 launch date was holding. Gilat did not disclose how many terminals would be purchased under the agreement.

Gilat said getting in on the ground floor of China’s high-throughput-satellite business positions the company for future work.

The contract “is a major milestone for us at Gilat,” Baharav said during the conference call, adding that it has “the large potential for future business in this important market.” He said the SkyEdge II-c technology would be integrated into fixed and mobile platforms for aeronautical, maritime, rail- and other land-based mobile communications.

For the three months ending June 30, Gilat reported an operating loss of $5.2 million on revenue of $44.3 million, down slightly from $45.2 million in the same period last year, when it reported an operating profit.

Baharav said Gilat is typically part of large system integrators’ teams in bidding for U.S. military contracts, and that in recent months expected orders have not materialized.

“We have been advised by system integrators that some [U.S. Department of Defense] orders have been delayed,” Baharav said. “Whether they will reappear, we don’t know.”

Gilat’s Kioscos project to connect remote locations to the broadband grid in Colombia, reported lower revenue than expected, he said, which added to the pressure caused by the devaluation of the Colombian peso relative to the U.S. dollar.

Gilat has partnered with satellite fleet operator Intelsat of Luxembourg and McLean, Virginia, for capacity on the Intelsat 907 satellite at 332.5 degrees east as part of the contract, with Colombian Ministry of Information Technologies and Communications.