What's Up With Globalstar Inc.?

Globalstar (GSAT +3.46%) recently reported second-quarter results: GAAP earnings sunk deep into the red due to the satellite communications specialist's skyrocketing share prices. Nice problem to have, right?

Here's what you need to know about its latest business update.

Q2 by the numbers

Data source: Globalstar.

Globalstar's bottom-line income swung from a $14 million profit to a $99 million loss due to large fluctuations in the company's portfolio of derivatives. Its debt portfolio includes many contracts that have derivative features, tying the value of the debt to the company's stock price, among other metrics. Share prices have gained 73% year-to-date as of Aug. 14, and those rising share prices triggered higher debt valuations, so Globalstar recorded a $77 million non-cash expense to account for this balance sheet update. A year earlier, share prices had been falling, and management recorded a $40 million non-cash gain on the same line. You win some, you lose some.

The company's sales rose in some product categories, but fell in others. The biggest gains came from Globalstar's Duplex line of low-speed satellite telephony services and its SPOT anti-theft location tracking tool. Sales of both services rose by double-digit percentages to deliver 85% of total service revenues.

But Spot and Duplex will likely be largely forgotten in a year or two, after Globalstar rolls out a new technology platform.

Image source: Getty Images.

What's next?

The company has been planning a terrestrial network for years now, repurposing its satellite-grade radio spectrum licenses to deliver services from ground-based cell towers and small cell stations.

Globalstar isn't planning a brand new wireless network to compete with AT&T (T +0.69%) and Verizon Communications (VZ 0.53%), but more of a partnership approach. On the Q2 earnings call,  CEO Jay Monroe said that he is busy talking to potential partners who are already part of the wireless industry, offering them a new way to boost network speeds with the help of his company's spectrum licenses.

"In order to take best advantage in unlocked considerable value we've built up in Globalstar, from our U.S. spectrum, our international spectrum and our satellite network, we are in partnership discussions with numerous companies," Monroe said.

Specifically, Globalstar's licenses and technologies are great for small-cell installations that serve up high-speed connections in a tight footprint. All of the major telecoms already make use of small-cell hubs, managed by the same companies that operate cell towers across the nation. Globalstar also aims to tap into the coming 5G wireless technology platform, increasing the speed and reliability of its small-cell connections many times over. I wouldn't be surprised to see American telecoms signing up for lots these service-boosting tools. It's also possible that Globalstar could emerge as a buyout target if one of the majors decides it wants this asset all to itself.

Globalstar's annual sales add up to just $103 million these days. That's peanuts for Big Red and Ma Bell, and the list of potential customers is much longer than those two giants. I will be shocked if Globalstar doesn't at least double or triple its annual revenues when the next-generation network hits the market.