Last week's flame-out by satellite communications network

Iridium

(IRID)

and this week's 30th anniversary of

Neil Armstrong's

walk on the moon got me wondering: Whatever happened to the gold rush into space?

A decade ago, if 100 money managers had been asked which would be the better play, space commercialization or the Internet, 80 would probably have said space. (The other 20 would have responded: "What's the Internet?")

Yet here we are in 1999, and the Web has made fortunes for a lot of you, while -- based on a cursory reading of the headlines -- commercial space stocks resemble the Mir space station: springing leaks faster than they can be patched.

Besides Iridium, which is down from 70 to 7 because nobody wants to pay $3,000 for a glorified cell phone,

Lockheed Martin

(LMT) - Get Report

is off more than a third from its recent high, in part because its launch vehicles keep failing;

Orbital Sciences

(ORB)

has round-tripped from 50 to 20

twice

as one high-frontier division after another misses its targets; and

Loral

(LOR) - Get Report

, which may or may not have sold secrets to the Chinese, is down a third from its high.

It seemed like a good time to check in with some of the people whose complicated job it is to follow these stocks. But when I did -- you know where this is going, don't you? -- it took about five minutes to realize that the headlines don't tell the real story. Notwithstanding the exploding rockets and imploding stocks, this year the gold rush into space finally took off. And from here on, it's going to be absolutely huge.

The past year's mess, say the optimists, is just a case of bad execution by a few managements who, in their defense, are trying things that have never been done before. Merging a bunch of geostationary satellites into a functioning telecom network is virgin territory. Selling satellite phone services ("global mobile telephony" in the industry's poetic argot) with $3,000 handsets is a marketer's nightmare. And launching heavy payloads with today's rockets guarantees the occasional explosion.

But Moore's Law works up there just like it does down here. As circuits get smaller, satellites get more powerful, letting smaller dishes and/or handsets receive their signals. Smaller is cheaper, which broadens the market, which leads to longer production runs, lower prices and an even broader market, ad infinitum.

The first space business to hit the steep part of this curve is direct broadcast satellite TV, or DBS. Yesterday's monstrous satellite dishes have shrunk to 18 inches, and their price is down from thousands of dollars to a couple hundred, sending demand through the roof. The big two of DBS,

Hughes Electronics'

(GMH)

DirecTV

and

Echostar

(DISH) - Get Report

are adding a combined 200,000 new subscribers each month with no letup in sight.

Soon, these guys and others will start offering broadband Internet. Soon after that will come satellite telephony with the kind of cheap, light handsets familiar to "X-Files" fans. Even with several big new satellite networks on the drawing board, at least one analyst thinks the resulting demand for satellite services will swamp supply by 2002.

Then

, a new generation of cheap, reusable launch vehicles will come on line, lowering launch costs and shifting the boom into high gear.

There are two main ways to play this. First is to stick with the big guys who are buying pieces of everything in the hope that whatever wins out in the end, they'll own it. Satellite giant Hughes Electronics, for instance, owns DirecTV and a large part of

PanAmSat

(SPOT) - Get Report

; Loral is a leader in satellite services and has a big piece of emerging satellite network

Globalstar

(GSTRF)

;

Motorola

(MOT)

is the driving force behind Iridium (a

debacle which is already priced into MOT's stock) and is a major supplier of equipment to

Teledesic

, a

Bill Gates

/Craig McCaw "Internet-in-the-sky" venture. Motorola is also a leading maker of cell phones.

Lockheed Martin is a likely source of tomorrow's cheap launch vehicles. It owns stakes in

Pasifik Satelit Nusantara

(PSNRY)

,

Comsat

(CQ)

and Loral, and has a substantial book of defense contracts to fall back on. On a smaller scale, Orbital Sciences is carving out niches in low-cost satellites, launchers and satellite data and imaging networks. Of the five, only Hughes is anywhere near its 12-month high.

Or you can take a flier on this market's

Amazon.coms

(AMZN) - Get Report

. Echostar will, according to Street estimates, approach break-even next year and use its massive operating leverage to earn serious money thereafter;

Gilat

(GILTF)

is a leader in very small aperture terminal, or VSAT, a technology suited to things like credit card authorization, inventory control and corporate intranets; Globalstar's satellite telephony system is due to go on line later this year, with the benefit of Iridium's example; PanAmSat offers video and Internet services worldwide and is the only profitable company on this list.

And for a real lottery ticket, consider

CD Radio

(CDRD)

, which wants to do for car radio what DBS did for television, Next year it plans to offer 50 channels of commercial-free, CD-quality music, news and sports to commuters nationwide.

Great stories, these. But remember: The past year proves, once again, that you can be right about an industry and still get creamed if you buy in too early or back the wrong horse. Before biotech finally proved itself, dozens of little start-ups raised hopes and money and then disappeared. The early computer makers like

Atari

and

Commodore

are long gone, and among the original online services, only

America Online

(AOL)

made anyone rich. They don't call it the bleeding edge for nothing.

But when a technology proves itself, the best business models attract a lot of money. Biotech leader

Amgen

(AMGN) - Get Report

went nowhere between 1996 and 1998. But since then it's tripled. Same thing with AOL. So that's the question: If space is the next Internet, is this 1996 or 1998? Guess we'll find out in 2000.

John Rubino, a former equity and bond analyst, writes a column on mutual funds for POV and is a frequent contributor to Individual Investor, Your Money and Consumers Digest. His first book, Main Street, Not Wall Street, was published by William Morrow in 1998. At time of publication, he had no position in any stocks mentioned. While Rubino cannot provide investment advice or recommendations, he invites your feedback at

rubinoja@yahoo.com.