Six-Year Venture Never Took Off Domestically

Following a detailed business and market analysis of its Connexion by Boeing high-speed broadband communications businees, the aerospace manufacturer announced Thursday it will exit that market.

"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."

The move was, perhaps, inevitable, following Boeing's announcement in June that -- due to sluggish sales of its service -- it was taking steps to explore the sale, or outright closure, of the six-year venture.

Boeing says it will work with its existing customers to phase out Connexion, which is currently used by 11 overseas carriers including Lufthansa, All Nippon Airways and El Al.

Although domestic carriers United, American and Delta has once expressed interest in the idea -- even supporting the program early on -- all three pulled that support following the events of September 11. 

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.

Boeing says 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.

FMI: www.connexionbyboeing.com