Defense contractor Lockheed Martin Corp. on Friday said it would quit the telecommunications business, selling stakes in three satellite networks and taking a $1.7 billion charge, due to overcapacity across the telecoms sector. 

Pieces of Lockheed Martin Global Telecommunications will be retained, but the rest will be sold, including large stakes in the INTELSAT, Inmarsat and New Skies NV international mobile satellite networks, the company said. 

``In view of continuing overcapacity in the telecommunications industry worldwide and deteriorating business and economic conditions in Latin America, we no longer anticipate that the LMGT businesses as a whole will be able to generate sufficient returns to justify continued investment,'' Vance Coffman, Lockheed chairman and chief executive, said in a statement. 

The decision comes just a year after Lockheed spent $2 billion to buy the 51 percent of satellite operator Comsat Corp. that it did not already own. 

But the restructuring was expected among Wall Street and industry analysts, who have long pointed to overcapacity in satellite telecommunications. 

Some analysts characterized the announcement as a positive catalyst for Lockheed, allowing the nation's top defense firm to reduce risk. 

Still, Lockheed's stock slipped on the New York Stock Exchange, down $1.05, or 2.27 percent, to $45.15 in midday trading. The shares have gained about 45 percent over the past year and 18 percent since Sept. 11. 

Lockheed plans to keep three parts of the telecoms operation -- Systems & Technology and Comsat General, with strength in network engineering and advanced satellite technologies, and U.S. Enterprise Solutions, a provider of information technology services to commercial customers within the United States. 

Those units, which generate about $450 million in revenues annually, will be folded into other business segments. 

HEFTY FIGURE, OUTLOOK UNCHANGED 

Howard Rubel, an analyst at Goldman Sachs, referring to the charge announced by Lockheed, said, ``The size of the number sort of surprises people a little bit, but I don't think it's anything more than that.'' 

The Bethesda, Maryland maker of fighter jets and missile systems said it would record after-tax charges in the fourth quarter totaling $1.7 billion, or $3.96 per share, for the restructuring. 

Lockheed said the charge did not change its outlook for earnings and cash flow from recurring operations in 2001 and 2002, as the cash portion of the charge amounts to less than 2 percent of the total. 

Wall Street analysts on average expect Lockheed to earn $1.45 per share this year and $1.76 per share in 2002, according to research firm Thomson Financial/First Call. 

The charge reflects costs of severance and infrastructure reductions, value impairment related to some businesses, and a $255 million write-down for its investment in Astrolink International. Astrolink is a joint venture with TRW Inc., Liberty Media Corp. and Italy's Telepazio. 

About 650 jobs will be lost, Lockheed said, but affected workers will have the opportunity to apply for positions in other units. About one-third of the 650 have accepted or have been extended offers so far, it said. 

Quitting the telecommunications field reduces the number of Lockheed operating units to four from five. Lockheed restated its operating results for 2000 and the first nine months of 2001 to reflect the telecommunications businesses as discontinued operations. 

WHAT'S FOR SALE 

Lockheed said it will start the process of selling the telecommunications businesses immediately. 

The company previously said it had agreed to sell the Comsat Mobile Communications operations, which provides global service via the Inmarsat system, to Telenor of Norway for $116.5 million in cash. The sale should close by year-end. 

Candidates for sale also include Satellite Services, encompassing World Systems and Lockheed Martin Intersputnik, as well as Enterprise Solutions-International, a provider of telecommunications network services primarily in Latin America.