Nov 01, 2014

Canada’s MDA Suggests Lack of Government Support May Prompt Another Move

Estimated Article Reading Time: 3 min.

(By Peter B. de Selding | Oct. 31, 2014) “We are concerned that Canada will not continue in the radar area — just as we were concerned about robotics, and we were right, unfortunately,” MDA CEO Daniel Friedmann said. Credit: MDA photo

PARIS — Satellite and space hardware builder MDA Corp. on Oct. 30 warned the Canadian government that lukewarm government support for MDA activities was accelerating the company’s disengagement from Canada.

In a conference call with investors, Richmond, British Columbia-based MDA said Canada’s nonrenewal of an unmanned aerial vehicle (UAV) services contract already pushed the company to relocate this business to Australia, whose government wants to continue, post-Afghanistan, its use of MDA’s UAV services business at least through 2017.

Canada’s seeming vacillation as to how to advance the nation’s specialty in space-based robotics was in part responsible for the company’s purchase of a small U.S. company that has since been folded into MDA’s satellite manufacturing business, Space Systems/Loral (SSL) of Palo Alto, California.

Is radar next? Canada’s support for the three-satellite Radarsat Constellation Mission notwithstanding, MDA Chief Executive Daniel E. Friedmann said the government’s recent moves call into question its longer-term policy.

“We are concerned that Canada will not continue in the radar area — just as we were concerned about robotics, and we were right, unfortunately,” Friedmann said.

While more directed at securing U.S. government business, MDA’s acquisition of General Dynamics’ Advanced Systems division, based near Detroit, for an undisclosed sum is another example of MDA’s expanding non-Canadian activities. The company, which employs 170 and does about 40 million Canadian dollars ($35 million) in annual revenue, provides radar systems to U.S. government customers.

“We’ve now acquired the pre-eminent radar company in the United States,” Friedmann said. “That’s an insurance policy [against possible Canadian government withdrawal from radar] and an expansion policy.”

MDA used to invest 90 percent of its research and development budget in Canada, Friedmann said. Now it is about one-third, as U.S. and other nations show more promise for the company.

SSL, whose main business is commercial telecommunications satellite construction, is the core of MDA’s U.S. effort. SSL has booked eight satellite orders so far in 2014 — the eighth, announced Oct. 29, is for an unidentified customer — and sees 2015 as being just as good a year for the broader satellite telecommunications business.

MDA recently completed construction of a telecommunications satellite for the Ukrainian government. The satellite is being placed into storage pending Ukrainian payment for the satellite’s ground infrastructure. The contract remains frozen for the time being.

Friedmann said the Russian Express-AM6 satellite, for which MDA built the telecommunications payload, is healthy in orbit after its Oct. 21 launch aboard a Russian Proton rocket. Final tests of the satellite will await its arrival, after eight months, to its final operating position.

Express-AM6 was built before Russia’s Ukrainian incursion caused several Western governments to curtail their Russian business. Once a key element to MDA’s hopes for future satellite business, the Russian market “is now closed” to the company, Friedmann said.

SSL’s win of a contract with commercial satellite Earth observation services provider Skybox Imaging, now owned by Google, for 13 satellites is viewed at MDA as a ticket to broaden SSL’s portfolio to include smaller satellites in low Earth orbit, for both telecommunications and Earth observation.

Friedmann said SSL is chasing “four or five international opportunities” for low-orbiting satellites, as well as several U.S. commercial opportunities for the same product line. As part of its Skybox contract, SSL has access to Skybox’s satellite building technology.

MDA booked a charge of 15.6 million Canadian dollars in the three months ending Sept. 30 to cover severance charges at SSL, whose production facility is being revamped and expanded to increase throughput and reduce costs.

Friedmann said the global commercial telecommunications satellite market is getting more competitive and that SSL is focused on standardizing satellite components so that each spacecraft is not built as “its own special baby,” but with enough common parts to reduce overall production costs.

MDA said it spent 5 million Canadian dollars in the nine months ending Sept. 30 on litigation costs related to the now-dropped lawsuit filed by ViaSat Inc. of Carlsbad, California, alleging patent infringement by SSL.

The lawsuit was filed before MDA’s purchase of SSL from Loral Space and Communications of New York was concluded, and Loral indemnified MDA for the latter’s costs as the litigation proceeded to trial in a California district court.

Source