It's not every day that a company finds itself in the middle
of an event that reads like a Cold War spy novel.
That's what happened withDigitalGlobe (
) recently. The company provides space imagery and geospatial
content. It collects satellite and aerial images used for defense
and intelligence, mapping and environmental monitoring.
In late November, DigitalGlobe released images that appeared
to show North Korea moved sections of a long-range rocket to a
launch site in preparation of a long-range ballistic missile
In a Nov. 26 statement, DigitalGlobe said that "given the
observed level of activity noted of a new tent, trucks, people
and numerous portable fuel/oxidizer tanks, should North Korea
desire, it could possibly conduct its fifth satellite launch
event during the next three weeks."
The news quickly caught the attention of government leaders
around the globe. North Korea is under U.N. sanction for its
nuclear weapons program, but has often flaunted its arsenal to
all who cared to see.
According to a Dec. 3 Reuters report, the launch is still
scheduled to take place between Dec. 10 and Dec. 22 after being
postponed in November.
In addition to bringing international attention to North
Korea, the news also brought attention to DigitalGlobe.
In a note, JPMorgan analyst Paul Coster called the event a
"mild positive" for DigitalGlobe.
"It's a timely reminder of the value of commercial earth
observation satellites," he said.
DigitalGlobe operates in two segments: Defense &
Intelligence and Commercial. Its customers include everyone from
urban planners and telecom firms to U.S. agencies like NASA and
the National Geo-Spacial Intelligence Agency, a unit of the
Department of Defense.
The company was founded 20 years ago as WorldView Imaging. It
had its initial public offering in May 2009. As recently as 2005,
it had less than $100 million in annual revenue. Last year, it
posted $340 million.
The profit picture has been a little cloudier with
DigitalGlobe logging annual earnings declines in 2010 and 2011.
That run should end in 2012, however. Analysts expect
DigitalGlobe to pose double-digit or better earnings gains in
each of the next four years.
The company's imagery solutions support a number of uses in
defense and intelligence, mapping and analysis, environmental
monitoring, oil and gas exploration, infrastructure management,
Internet portals and navigation technology.
Meanwhile, DigitalGlobe also drew headlines over the summer
when it announced plans to merge with rival satellite
) in a cash and stock deal valued at $900 million. The
transaction was announced in July and is expected to close by the
end of next quarter.
Under terms of the deal, the combined company will retain the
DigitalGlobe name as well as its executive leadership, including
Chief Executive Jeffrey Tarr. DigitalGlobe shareholders would
control 64% of the company. Its board would hold six of 10
GeoEye in May attempted to acquire DigitalGlobe for $792
million, but that offer was rejected by DigitalGlobe
One advantage of the merger is that it should reduce
DigitalGlobe's reliance on the U.S. government, its top
This is especially important in the face of expected cuts in
the defense budget.
DigitalGlobe and GeoEye both supply products to the commercial
market, including imagery to location-based applications such as
The deal also should result in cost savings and greater
efficiency, watchers say.
"There is significant upside to estimates of EBITDA and free
cash flow after DigitalGlobe acquires GeoEye," said James
McIlree, an analyst at Dominick & Dominick.
When the merger was announced, DigitalGlobe said the deal
would yield net future savings of $1.5 billion, thanks mainly to
fewer expenses associated with building and launching
Financially, GeoEye has had a slightly better go of it in
recent years. The company logged earnings gains each year from
2009 through 2011. Sales have grown at an average annual
compounded rate of 22% over the past five years. That compares to
a 17% growth rate for DigitalGlobe.
But DigitalGlobe has accelerated its growth pace this year
with sales rising 22% through the first three quarters of
The company posted revenue of $107.2 million during the third
quarter. That was up 31% from a year earlier, its best gain in
years, and easily topped Wall Street estimates for $97.7
"Our results are evidence of our progress transforming
DigitalGlobe into a high-growth, scalable, recurring revenue
information business," CEO Tarr said in a statement.
Revenue in DigitalGlobe's commercial business climbed 57% from
a year earlier to $26.1 million. Revenue in its defense and
intelligence business gained 24% to $81.1 million.
"Commercial revenue was strong across each segment:
location-based services, international civil government, joint
ventures in Russia and China and other industry verticals,"
analyst McIlree noted.
Earnings for the quarter came in at 18 cents a share, up from
2 cents the prior year and 4 cents above Wall Street
DigitalGlobe's stock price hit a 15-month high of 27 on Oct.