Channel Master USA in Deep Trouble

Channel Hopper

Taken from the News Observer (Vicky) - online magazine

Former Smithfield titan selling plant


SMITHFIELD -- A gamble on high-speed Internet access hasn't paid off for Channel Master. The Smithfield satellite-dish manufacturer has sharply reduced its work force and put its building up for sale to generate cash.
Once one of Smithfield's largest employers with more than 1,600 workers, Channel Master now employs roughly 440.
Last month, in an attempt to increase its working capital and pay down some debt, Channel Master put its 750,000-square-foot-building on the market.

"Our intention at this time is to find a buyer and then lease back part of the space for our existing operators," said Bill Currer, president and chief executive, in a statement.

He said the company has begun consolidating operations into roughly half the plant.

Channel Master's current problems stem from 2000, when Primestar, one of its two major customers, was sold to DirectTV. Channel Master lost that business, which made up 50 percent of its sales, leaving EchoStar as its only big client.

The next year, Channel Master's owners -- Questor Partners Fund, a corporate turnaround specialist based in Southfield, Mich. -- decided to shift the company's focus to the satellite-broadband communications industry, which provides high-speed Internet access via satellite dishes.

Channel Master signed contracts with two leading satellite-broadband companies, WildBlue of Denver and Astrolink of Bethesda, Md., which were gearing up to introduce products that would compete against cable modem services such as Time Warner's Road Runner and other digital subscriber lines services.

"Channel Master looked at satellite broadband industry as a way to grow their business after losing a big client," said Ryan Jones, a senior analyst at Yankee Group, a telecommunications research group. "They invested a lot of money in the two-way satellite business and unfortunately that dedication of resources turned out to be the wrong strategy.

"Two of their core businesses were hard hit, and that's why you've seen them shrink over the years."

Satellite broadband never quite took off the way experts expected it to, Jones said, because cable and DSL companies quickly spent millions to expand their broadband customer base to include some rural areas. As more people signed on, prices were lowered to levels that the satellite companies could not match, leaving them only the customers who had no other option for broadband.

EchoStar has ended its plans for satellite broadband. Channel Master's executives did not return repeated calls to discuss the company's future plans.

The forecast for the satellite broadband industry remains gray, said Dominic Ainscough, a senior analyst at Yankee Group. He said there are 18 million broadband users in the country, but only 200,000 of those are satellite customers. Ainscough said his research shows that gap will widen. In 2007, he estimates that there will be approximately 48 million broadband users, but just 1.1 million satellite consumers.

"The broadband market has grown tremendously," said Ainscough. "The prices have plummeted to $30 and $35. To compete, satellite companies have got to come down to the $40 or $45 range, and they have not been able to do that."

There is a very fine line between "hobby" and "mental illness"