Gilat Posts Big Gains in 2011, Sees Further Growth in 2012

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PARIS — Satellite broadband ground hardware manufacturer Gilat Satellite Networks reported big increases in revenue, operating income and backlog for 2011 and said growth would continue with Ka-band satellite projects sponsored by governments and with defense forces’ increased use of satellites for mobile communications.

Petah Tikva, Israel-based Gilat, which has secured contracts in Latin America, Russia and Asia for its line of satellite terminals for corporate and consumer broadband networks, now does more than half its business outside the United States.

In a Feb. 22 conference call with investors, Gilat’s new chief executive, Erez Antebi, said the company is optimistic that with the advent of Ka-band systems that can deliver higher bandwidth at lower cost in many regions of the world, Gilat’s near-term prospects are good.

Gilat competes with Hughes Network Systems of Germantown, Md., ViaSat Inc. of Carlsbad, Calif., and Newtec of Belgium, among others, for government and commercial contracts that often feature thousands of VSAT, or very small aperture terminal, satellite systems.

Among Gilat’s recent wins is a large contract with Russia’s RTComm, the satellite service division of Rostelecom Group, Russia’s national telecommunications operator. RTComm is planning three Ka-band satellites using spot-beam technology of the kind deployed in Europe and the United States to serve some 2 million Russian subscribers with broadband links.

The company won a contract from Kazsatnet, Kazakhstan’s telecommunications provider, to provide satellite broadband gear to complement that company’s existing fiber network.

Another recent contract, with an unnamed national postal administration in Latin America, is for the deployment of 7,000 VSAT systems. A similar contract, with the Colombian government, will deploy Gilat-built broadband gear to several thousand Colombian schools.

“As for Ka-band, we see this next-generation satellite technology as driving significant future growth in the VSAT industry as it offers significantly higher satellite capacities and substantially lower costs of transmission,” Antebi said in the conference call. “Demand for ground infrastructure and [consumer broadband equipment] is expected to grow and we are investing significant R&D resources in this.”

He cited one consultancy’s forecast that annual Ka-band broadband service revenue will quadruple to $4.6 billion between 2010 and 2020.

For the 12 months ending Dec. 31, Gilat reported revenue of $333.9 million, up 46 percent over the previous year. When the company’s Wavestream division, which sells gear mainly for defense applications and was purchased in late 2010, is removed from the equation, the revenue increase was 22 percent.

Operating income was $17.5 million, compared with $1.3 million in 2010. Backlog at Dec. 31 stood at $264.6 million, up 14 percent from a year ago.

The Wavestream acquisition was made on the assumption that Wavestream’s product line would survive U.S. Defense Department cutbacks by offering smaller, less-costly gear than other Pentagon contractors.

But the approximately $70 million in Wavestream revenue in 2010 dropped to about $59 million in 2011, a reduction that Gilat’s outgoing chief financial officer, Ari Krashin, said was directly attributable to “the continuing pressure on [U.S. Defense Department] budgets.”

While offering no assurances that Wavestream’s defense revenue will rebound in 2012, Gilat is nonetheless forecasting that total company revenue will see at least some growth this year. Revenue is projected to be between $340 million and $350 million, Antebi said.

For 2011, 46 percent of the company’s business was done in the United States, much of it conducted to Gilat’s Spacenet subsidiary. Latin America accounted for 30 percent and Asia for 15 percent. Europe was 6 percent and Africa 3 percent.