When the U.S. National Geospatial-Intelligence Agency (NGA) awarded contracts to build next-generation imagery satellites to Digitalglobe and Orbimage, many industry observers thought it was a foregone conclusion that Space Imaging, which failed to win a contract, was going to be acquired by one of the two winners.

The only question was which one, and with Orbimage’s planned acquisition of Space Imaging, the industry now is looking at a future with normalized revenues and a growing competitive market, particularly outside the United States.

“I like this deal,” Ed Jurkevics, analyst with Chesapeake Analytics, told Satellite News. “It was needed. There was just no way you were going to have a healthy satellite company without an NGA contract.”

Orbimage, which operates the Orbview 3 imagery satellite, announced Sept. 16. that it will pay about $58.5 million for its rival satellite imagery company, gaining control of the Ikonos spacecraft. Both satellites collect imagery with 1-meter resolution. Digitalglobe operates the Quickbird satellite, which collects imagery with 0.61-meter resolution.

All three companies hold Clearview contracts to supply imagery to the NGA from the current generation of satellites. Under Nextview, Digitalglobe and Orbimage will build imagery spacecraft capable of collecting imagery with resolution of a half-meter or better.

“From our perspective, [the acquisition] clears up a lot of the questions surrounding the industry for the last couple of years,” Chuck Herring, Digitalglobe spokesman, told Satellite News. “We now know how the industry is shaping up and moving forward. We feel very strongly about our position. We are on schedule to launch our next generation system about a year ahead of any competitor.”

While the Orbimage acquisition must be approved by government regulators, NGA has indicated its support. “We hope this consolidation will ultimately improve the overall health of the industry to sustain a strong and robust U.S. commercial remote sensing capability,” Susan Meisner, NGA spokeswoman, said.

Competing Internationally

One aspect that made Space Imaging an attractive pickup is the company’s presence outside of the United States, Orbimage CEO Matthew O’Connell said.

“We get three assets” from the Space Imaging acquisition” — the Ikonos satellite and its ground system, a terrific workforce with classified clearances and lots of experience, and “an international network that we think is extremely attractive,” O’Connell told Satellite News. “We can download directly overseas and Space Imaging can download directly overseas,” which will put Orbimage in a good position to compete internationally, particularly against future systems such France’s Pleiades and planned satellites by Korea, India and Russia. “We think [acquiring Space Imaging] positions us well in the international arena,” he said.

Jurkevics agreed that the acquisition will help Orbimage, as well as Digitalglobe, compete in the international market, in part because it helps to simplify the industry. “Foreign countries will feel more confident in choosing one of these companies,” he said, noting both Digitalglobe and Orbimage should benefit from being able to sign longer-term contracts, making it easier for them to make capital investments and enter into longer term agreements with international companies.

The established relationships that Space Imaging has should put Orbimage in a solid position to attract international customers for its Nextview satellite, even though Digitalglobe is expected to have its Nextview satellite in orbit and running before Orbimage, Jurkevics said. Orbimage “really bought into those contracts and relationships with [international] customers so, [Orbimage] will have a significant leg up on signing those clients up for its Nextview bird,” he said.

Those relationships will be key, since the two Nextview satellites will eliminate a key technical advantage Orbimage currently has over Digitalglobe, Jurkevics said.

“Digitalglobe didn’t have international ground stations because they didn’t have the ability to download there,” Jurkevics said. “They had a very particular bird where they could only download at the poles and pre-program, and they didn’t have that ground station model because in their design, Digitalglobe’s current bird cannot image and transmit at the same time. I believe all the Nextview birds will able to collect imagery while transmitting the data simultaneously. That will open up the international markets for Digitalglobe.”

Other Opportunities

Another benefit from this acquisition is a stabilized remote sensing industry, which could actually lead to more work from the U.S. government, O’Connell said.

“We think there is more work we can do on the defense, [intelligence] and government side,” O’Connell said. “If you look at the various large governmental satellite programs, they are in the press all the time for being way over schedule and way over budget. We think that there is a lot more that the commercial market could do in the government arena. We don’t want to do the exquisite technology that the sophisticated government programs do, but we think there are a lot of routine collections that we could do for the government. We think the government would save money by directing more of the routine satellite work to the commercial sector.”

In addition, O’Connell said the new Orbimage will be looking to increase its revenues from the commercial sector.

“We are very excited about business-to-business commercial satellite imagery sales,” O’Connell said. “I am less interested in imagery that is made available to the general public. Google has obviously made a big splash with the ability to show people their homes, but I honestly don’t think in terms of revenue long-term that consumers are a terrific source of revenue for satellite imagery.”

Among the enterprise opportunities O’Connell cited are the insurance industry and the corporate real estate industry. “The biggest benefit is land use and valuation and changes in land use patterns.” He also noted that through Orbimage’s partnership with Microsoft, businesses are using satellite imagery to supplement applications used to provide directions. Microsoft “wants to make satellite imagery available to people so they can literally get a snapshot of where they are headed,” he said.

O’Connell also said that using satellite imagery to help manage resources also presents a big opportunity because the space on the planet and its resources are finite, but the population is continuing to grow.

Consolidation

Orbimage’s move to acquire Space Imaging likely signals the end of consolidation among the satellite operators in the remote sensing industry. However, in the overall market segment, consolidation opportunities still exist, particularly among the value-added resellers.

“I have been asked to look at two companies and a third situation is a money guy in New York who said, ‘I’d like to have you have dinner with a guy in the industry,'” O’Connell, “I can’t mention any companies because these are highly informal. There are plenty in the value-added arena and we will look at them once the dust settles.”

–Gregory Twachtman

(Ed Jurkevics, Chesapeake Analytics, 703/525-6730; Chuck Herring, Digitalglobe, 303/682-3820; Susan Meisner, NGA, 301/227-3132; Nancy Coleman, Orbimage, 703/480-9580)