Tag Archives: DigitalGlobe

Spy satellites in Europe

DigitalGlobe and GeoEye are not the only commercial satellite companies providing high resolution imagery to governments. In Europe, Astrium is talking about its new satellite offerings, and positioning itself and the merged DigitalGlobe as the world’s leading providers of imagery:

Patrick Le Roch, director of Astrium Services’ Geo-Information division, said the proposed merger of DigitalGlobe and GeoEye “creates a de facto duopoly between us and the merged U.S. companies.”

Briefing reporters here Oct. 8 during a visit to the Pleiades 1B and Spot 7 assembly facilities, Le Roch said Astrium Services estimates the global addressable market for Earth observation imagery is about 1.8 billion euros ($2.3 billion) in 2012.

The market, he said, is growing at a rate of 7 percent per year, with the high-resolution component growing faster than the other niches.

Le Roch said the “addressable” qualifier is meant to exclude markets that are not open to international competition. The biggest of these is the U.S. government, whose National Geospatial-Intelligence Agency (NGA) buys commercial satellite imagery for U.S. defense and intelligence agencies.

According to Space News, this is their strategy:

Spot 6 and Spot 7 will be operated in conjunction with the two Pleiades high-resolution satellites, which were financed by the French government and have a military mission as well as a commercial one, with Astrium Services in charge of commercial sales.

Astrium Services hopes to maintain its dominant share of the medium-resolution market, and to use Pleiades to confront DigitalGlobe/GeoEye at the high-resolution end.

The French government has estimated that the two Pleiades satellites together cost some 650 million euros. The satellites take raw images with 70-centimeter resolution at nadir. These images can be resampled to produce 50-centimeter pictures.

Their higher resolution comes at a price, however: Pleiades’ swath width is just 20 kilometers.

DigitalGlobe buys GeoEye

In May this year two companies worth a combined $1.23 billion in market capitalization tendered hostile bids to buy each other. The bids were rejected, and confidential talks between the companies broke down in a rather unusual exchange of accusatory letters. One of the companies even highlighted weaknesses it saw in the other company’s SEC filing.

The two companies, DigitalGlobe and GeoEye, are key providers of satellite imagery to the United States intelligence community. They are also the subject of a paper I am writing with two colleagues, Sue Roberts and Ate Poorthuis at UKY on the intelligence contracting industry.

At 8:30am this morning the two companies held a conference call to announce that DigitalGlobe was buying GeoEye. This means that there is now only one company (DigitalGlobe) building spy satellites in the USA. There is now effectively a monopoly on spy satellites. As of 10:30am DGI stock was down about 1%.

According to slides released by DGI, the new company will be 2:1 owned by DigitalGlobe stock holders and the CEO will be Jeffrey R. Tarr, the current DGI CEO. The deal will close late 4Q 2012 or early 1Q 2013 and will need stockholder and regulatory approval.

The other wrinkle in this situation is that in the fall of 2010 the NGA awarded a huge $7.3 billion contract to the two companies, to be played out over ten years.  Earlier this year NGA indicated it wasn’t going to fully fund this year’s award to GeoEye and clearly both companies saw the writing on the wall (they receive the majority of their earnings from government contracts as we discuss in the paper). Hence the attempted hostile take-overs earlier this year.

The press announcement also appears to indicate that satellite production will be slowed–both satellites currently under construction (1 per company) will be completed, but only one launched in “2013-14” (previously GeoEye was going to launch in early 2013) while the other will serve as a “ground spare” until launch as late as 2016-2018.

We will see what this means for the IC and for contracting. It is interesting to note however, that the market for remote sensed imagery is contracting at a time when the IC is placing increased emphasis on “cultural awareness” and “socio-cultural analysis ” (SCA). We’re not claiming that one is driving the other, but in our analysis of geographical intelligence, RS and the “human terrain” are clearly undergoing significant shifts. Today’s market contraction of RS underlines this.