ORBIMAGE Rises From Bankruptcy

By | April 5, 2004 | Feature

The prospects for Dulles, Va.-based ORBIMAGE are brightening, and they could take a major leap forward if it wins the second NextView contract the U.S. government is expected to award to a U.S.-based remote-sensing company later this year.

The company successfully emerged from Chapter 11 bankruptcy-court protection on the last day of 2003, followed last week by announcing it was boosting its once-skeletal staff by 50 percent. Is also is taking further measures to build marketplace momentum, boasting a clean balance sheet after shedding its previous hefty debt load.

ORBIMAGE is poised for growth. For example, the company’s fortunes rose March 29 when it received a 22-month, $26.7 million ClearView contract from the U.S. government’s National Geospatial-Intelligence Agency (NGA) to provide high-resolution imagery as part of an ongoing federal program. The contract also includes a government option to extend the pact for two additional years if sufficient funding is available in future federal budgets, NGA officials said.

Although that contract was no surprise, because an award in that approximate dollar value had been anticipated for months, ORBIMAGE is an unexpected contender for a potential $500 million NextView contract from the NGA that would help ensure a second source of imagery is available from a U.S. company. Colo.-based DigitalGlobe received the first NextView contract, and it is eligible to bid on the second one but its chances of succeeding are almost nil because the reason for a second contract of similar size to the one awarded last year is to have more than one imagery provider.

In interviews with Satellite News last week, ORBIMAGE officials expressed great interest in gaining the NextView award as an encore to the company’s ClearView contract. ClearView is a program that currently provides imagery to NGA for products, services and pixels. In contrast, NextView is a cost-sharing contract for the government to gain assured capacity on next-generation commercial imaging systems that have yet to be built.

ORBIMAGE’s ClearView award makes it the third industry recipient of a contract under that NGA-led program. The first two ClearView contracts were given by the NGA in January 2003 to DigitalGlobe and another Colo.-based company, Space Imaging.

The biggest ClearView contract of $120 million for three guaranteed years, with two additional one-year extensions possible, went to Space Imaging. DigitalGlobe gained a $72 million, three-year pact, with the possibility of two additional one-year extensions.

In total, as much as $500 million could be awarded to the three ClearView contract recipients for the guaranteed time periods, NGA officials said. The ClearView contracts give greater access and priority to U.S. government customers while providing U.S. remote- sensing companies with long-term commitments and an increased ability to gain efficiencies in the management of federal customer requirements.

The award of a third ClearView contract is important because it helps make U.S. commercial satellite capabilities even more “viable and robust,” said NGA Director James R. Clapper Jr., a lieutenant general retired from the U.S. Air Force. The imagery products from ORBIMAGE and the other ClearView contract recipients will help the NGA to fulfill its “mission requirements,” he added.

All ClearView contract holders are capable of providing commercial satellite imagery with nominal ground sampling distances equal to or less than one meter for panchromatic sensors, NGA officials said.

NGA, a national intelligence and combat support agency whose mission is to provide timely, relevant and accurate geospatial intelligence in support of national security, recently broke off direct negotiations with Space Imaging for the second NextView contract. The talks failed when the two sides could not agree on the amount of the new contract and the services that could be provided for the price the government was willing to pay.

Space Imaging is expected to contend for the second NextView, now that it is slated to be bid competitively but no guarantee exists that the company will remain the frontrunner to receive it.

“Since NGA wants two commercial imagery providers, we believe we offer the best value for the U.S. government,” said Mark Brender, Space Imaging’s vice president of corporate communications. “We are hopeful we will be the second provider. We will review the RFP (request for proposal) and make decisions on our course of action at that time.”

NextView Prize

NGA intends to solicit bidders for a second NextView contract on or about April 15. The RFP and any resulting award will be to meet NGA’s requirement to help ensure multiple sources of high-quality commercial satellite imagery will be available continuously to support the agency’s mission, said Sandra Jacks, NGA’s program manager for commercial imagery. NGA anticipates that it will award the NextView contract on or about Sept. 30, she added.

The NGA’s focus is to develop U.S. remote sensing industry partners that can meet the agency’s requirements and a number of contenders exist for the award, Jacks said.

“Additionally, our decision to terminate NextView discussions with Space Imaging should not be viewed as an adverse inference regarding Space Imaging or its IKONOS II program,” Jacks said. To the contrary, Space Imaging would be welcomed and encouraged to participate in any future competitive acquisitions, she added.

From a business-standpoint, both ORBIMAGE and Space Imaging would gain a big boost from winning the second NextView contract. The loser would fall behind its competitors. The U.S. government is the biggest single customer for each of the remote-sensing companies, and a missed opportunity for such a huge contract likely will have a big effect on the industry’s ultimate survivors.

Aside from ORBIMAGE and Space Imaging, companies eligible to participate in the NextView procurement, are expected to be Boeing [BA], Northrop Grumman [NOC], Lockheed [LMT], Ball Aerospace and Digital Globe. That list, however, is pared down significantly when an analysis is made of each company’s existing alliances.

Lockheed is a major investor in Space Imaging, so it is unlikely to compete with its own remote-sensing partner. Ball is a primary contractor in DigitalGlobe’s NextView award and is unlikely to float a competitive bid. DigitalGlobe’s win of the first NextView award probably takes it out of the running, though the company may look for a role to support another company’s efforts to win the second contract.

Boeing and Northrop Grumman have the resources to mount competitive bids but the questionable financial prospects for remote sensing companies and a potential shakeout in that sector could steer both of them to explore supporting another bidder to minimize their potential risk.

“The big question for ORBIMAGE is its prospective satellite partner,” said Ed Jurkevics, principal at Chesapeake Analytics, an Arlington, Va.-based management-consulting firm that specializes in the remote-sensing sector.

Dulles, Va.-based Orbital Sciences [ORB], an original investor in ORBIMAGE that no longer has an ownership stake, is a potential satellite manufacturer for next-generation, remote-sensing satellites.

Because the NGA reportedly wanted Space Imaging to cover part of the cost of a next-generation system from commercially generated revenue, ORBIMAGE may be able to capitalize on its existing private-sector customer base to make a competitive bid. ORBIMAGE also has been aggressive in seeking out commercial buyers of its imaging that range from fishing- fleet operators to agricultural companies.

Indeed, ORBIMAGE’s ambitions are exhibited by its recent expansion of its staff by 50 percent to between 90 and 100 people.

“Most of the new hires have been in operations and customer support,” said Lisa Andrews, a company spokeswoman. “As we move forward, I believe we will be filling out our sales group, and probably some technical and satellite operations people.”

Further information about ORBIMAGE job openings can be obtained by checking the company’s web site, http://www.orbimage.com .

–Paul Dykewicz

(Howard Cohen, National Geospatial-Intelligence Agency, 301/227-3105; Mark Brender, Space Imaging, 703/558-0309; Timothy Puckorius, ORBIMAGE, 703/480-7527; Ed Jurkevics, Chesapeake Analytics, 703/525-6730)

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