Viasat's Strategic Crossroads: Can a Split of Broadband and Defense Units Unlock $11 Billion in Value?

The satellite communications firm Viasat Inc. (NASDAQ: VSAT) is facing a pivotal moment in its corporate history. Activist investor Carronade Capital Management, which holds a 2.6% stake in the company and $30 million of its debt, has launched a high-stakes campaign to split the firm's broadband and defense segments. The proposal, which could unlock an estimated $11 billion in combined value, reflects a growing divide between the two units: one poised for growth in the defense sector, the other grappling with declining revenue in the competitive broadband market.

The Case for a Spin-Off

Carronade's rationale hinges on the divergent dynamics of Viasat's two businesses. The defense and advanced technologies (DAT) segment, which includes contracts like the $1.5 billion U.S. DoD hypersonic technology allocation and a $568 million agreement with Ligado Networks, reported $1.22 billion in fiscal 2025 revenue. Analysts project mid-teen percentage growth for this unit in fiscal 2026, driven by surging demand for cyber defense, space systems, and AI-driven surveillance. In contrast, the broadband segment, which generates $3.3 billion in revenue, has seen a -3.8% one-year decline, pressured by terrestrial 5G expansion and regulatory headwinds.

The activist investor argues that a separation would allow each unit to optimize its capital structure and strategic focus. The DAT segment could leverage government contracts and R&D tax credits to fund innovation in high-margin defense projects, while the broadband unit could pursue aggressive debt financing to expand into rural connectivity and enterprise mobility. Carronade estimates the DAT segment alone is worth $50 per share, with potential share price ranges of $50–$100 post-split.

Historical Precedents and Risks

Spin-offs in the satellite and defense sectors have historically yielded mixed results. For example, Sierra Nevada Corporation's 2021 spin-off of its space division into Sierra Space enabled the new entity to target commercial opportunities while retaining access to the parent company's expertise. Similarly, Virgin Orbit's 2017 separation from Virgin Galactic allowed it to focus on small-satellite launch markets, achieving a $1.4 billion valuation by 2021. However, these successes often rely on strong balance sheets and clear market differentiation—factors Viasat currently lacks.

Viasat's financial health raises red flags. The company's debt-to-equity ratio of 1.65, negative operating margins, and a low Altman Z-Score of 0.44 (indicating high distress risk) complicate a spin-off. Restructuring costs could exacerbate liquidity challenges, and insider selling of $381 million over the past year signals skepticism among executives. Meanwhile, the board has yet to commit to the proposal, leaving investors in limbo.

Strategic Implications for Shareholders

The proposed split forces a critical question: Can Viasat's current structure adapt to the diverging growth trajectories of its units? A separation would enable each entity to pursue distinct strategies. The defense unit, operating in a $2.4 trillion global market, could capitalize on geopolitical tensions and U.S. defense spending increases. The broadband segment, meanwhile, would need to address declining revenue by investing in high-growth areas like 5G augmentation and enterprise mobility.

However, the risks are significant. A spin-off could trigger a credit downgrade, increasing borrowing costs at a time when Viasat needs capital to service its debt. Additionally, the company's lack of a clear path to profitability in the broadband segment—coupled with its reliance on volatile defense contracts—makes the proposal a double-edged sword.

Investment Perspective

For investors, the key is to assess whether the potential value unlock justifies the risks. While the defense sector's growth trajectory is compelling, Viasat's financial instability and governance challenges could derail the plan. The company's ability to secure favorable terms for the spin-off, manage debt, and attract new capital will determine its success.

In the short term, the stock may remain volatile as the board deliberates. A positive resolution could drive shares toward $50, but a rejection or delay might push them below $20. Long-term investors should monitor Viasat's engagement with Carronade and its capacity to execute a restructuring that balances activist pressure with operational realities.

Conclusion

Viasat stands at a crossroads. The proposed separation of its broadband and defense units offers a tantalizing opportunity to unlock value in a fragmented market, but it also exposes the company to significant financial and operational risks. As the U.S. defense budget expands and broadband competition intensifies, the outcome of this strategic review could reshape the company's trajectory. For now, shareholders must weigh the promise of $11 billion in potential value against the uncertainties of a high-stakes restructuring.