By Paul Dykewicz, Senior Analyst/Senior Editor

The U.S. government could be in the unusual position of picking which American-based, remote-sensing company vying for the second — and apparently last — NextView contract will become a long-term industry survivor. The NextView contract would involve construction, launch and operation of a next-generation, very-high-resolution satellite.

Two of the prime contenders for the second contract are Thornton, Colo.’s Space Imaging and Dulles, Va.’s ORBIMAGE. The first NextView contract, worth an estimated $500 million, was awarded last fall to Longmont, Colo.-based DigitalGlobe. The U.S. government’s reasoning behind supporting two remote- sensing companies is to assure competition in its future purchases of commercial imagery. The loser likely would be hard-pressed to persevere in a long-term battle with two U.S.-based rivals that have the advantage of enormous government contracts. No comparable potential revenue source exists in the commercial sector.

Companies interested in bidding on the contract must submit their proposals to the Bethesda, Md.-based National Geospatial-Intelligence Agency (NGA) by the recently extended deadline of June 15, and the winning bidder is to be chosen on or about Sept. 30. NGA, a national intelligence and combat support agency whose mission is to provide “timely, relevant and accurate geospatial intelligence in support of national security,” broke off direct negotiations with Space Imaging earlier this year for the second NextView contract. The efforts failed when the two sides could not agree on the dollar value of the new contract and what services could be provided for the price the government was willing to pay.

“We have submitted a first-class proposal,” said Mark Brender, vice president of corporate communications at Space Imaging. “It’s nine volumes and more than 500 pages. Our proposal offers NGA a significant increase in value for imagery pricing, assured access to the satellite, volume area coverage and priority tasking rights. We believe our offering meets or exceeds all of NGA’s threshold requirements.”

In addition, the Space Imaging proposal is innovative and creative, and it addresses the important requirements of NGA and the financial concerns of the company’s owners, Brender said.

“Winning this NextView contract is integral to our business plan,” he added. “We have had a razor-sharp focus on the fact that we have to bid for and win the NextView program.”

Space Imaging also is highlighting its financial strength, compared with its industry rivals.

“Our revenues for 2003 exceeded $200 million,” Brender said. “This surpasses DigitalGlobe and ORBIMAGE by a long shot. While DigitalGlobe may have a better balance sheet — and they did win the first NextView award — they are nowhere close in owning 43 percent of the worldwide remote-sensing market as Space Imaging does. ORBIMAGE just emerged from bankruptcy and only now is just starting to do business as their most recent financial statement indicates.”

ORBIMAGE reported last week that its first quarter revenues were $2.01 million and $1.69 million for the three months ended March 31, 2004 and 2003, respectively. Net losses for the three months ended March 31, 2004 and 2003, were $8.39 million and $2.51 million, respectively. The widened net loss in the first quarter of 2004 reflects an increase in operating costs, including depreciation, resulting from the commencement of operations of the OrbView-3 satellite and from interest expense on the company’s senior notes and senior subordinated notes issued Dec. 31, 2003.

“The overall financial performance of ORBIMAGE in 2004 thus far does not reflect the progress we have made in commencing our OrbView-3 operations,” said ORBIMAGE’s President and CEO Matthew O’Connell. “During the first quarter, we began delivering imagery to two of our international ground station partners. At the end of the quarter, we signed an agreement with the U.S. government to provide imagery and processing services for at least the next two years under the ClearView program.”

ORBIMAGE’s plan of reorganization assumed that its ClearView contract would generate revenue earlier than it did and would total more than the $26.7 million during 22 months that was awarded to the company by the NGA March 29. The company is seeking to build its business and to pursue new opportunities, including an almost 100-percent likelihood of bidding on the second NextView contract.

Sandra Jacks, NGA’s program manager for commercial imagery, said the agency’s goal is to develop U.S. remote-sensing industry partners that can meet its future requirements. A number of contenders exist for the award, Jacks added.

Aside from ORBIMAGE and Space Imaging, companies eligible to participate in the NextView procurement include Boeing [BA], Northrop Grumman [NOC], Lockheed Martin [LMT] and Ball Aerospace. Digital Globe only would be eligible to bid as a subcontractor for the second NextView award.

For such remote-sensing specialists as Space Imaging and ORBIMAGE, winning the second NextView contract would propel the company financially into a much brighter remote-sensing future. The loser ultimately may have little choice but to seek a consolidation partner.

Paul Dykewicz is senior editor and senior analyst of Satellite News. He can be reached at 301/354-1769 or at [email protected].