Feb 28, 2015

WorldView-3’s Imagery Sharpens DigitalGlobe’s Competitive Edge

(by Peter B. de Selding — February 27, 2015) PARIS — Geospatial imagery and services provide DigitalGlobe on Feb. 27 said its WorldView-3 satellite is the key to driving growth both with the company’s dominant customer, the U.S. government, and in the global commercial market.

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The showcase feature of WorldView-3, which entered service Oct. 1, is its 30-centimeter-diameter ground sampling distance. On Feb. 22 the U.S. government, as expected, authorized the commercial sale of 30-centimeter-resolution imagery, giving DigitalGlobe a long-sought weapon with which it will now attack the global market for aerial imagery.

DigitalGlobe is now, in effect, equivalent to the first on its block with a new iPhone. None of its competitors have 30-centimeter-resolution capability.

Its biggest challenger, Airbus Defence and Space of Europe, will need to attack DigitalGlobe from more-oblique angles to counter the barrage of visuals DigitalGlobe is now producing inviting prospective customers to compare 30-centimeter imagery with 70-centimeter imagery, which Airbus produces.

But like the iPhone for its owners, WorldView-3 does more for DigitalGlobe than fulfill a single mission. By expanding the amount of high-resolution imagery the company can collect, WorldView-3’s entry into service automatically increased the monthly revenue the company receives from its main customer, the U.S. National Geospatial-Intelligence Agency (NGA).

Under DigitalGlobe’s EnhancedView contract, NGA’s Service Level Agreement will now result in payments of $300 million per year, up from $250 million per year previously.

With WorldView-3 contributing to DigitalGlobe’s daily image harvest and feeding the company’s image library, DigitalGlobe is now able to retire to older satellites, QuickBird and Ikonos. QuickBird was decommissioned earlier this year, and Ikonos will follow in the coming weeks.

DigitalGlobe will thus save the operating expenses associated with the older satellites without compromising image delivery to customers, the company said in a Feb. 26 conference call with investors and a filing with the U.S. Securities and Exchange Commission.

In the conference call, DigitalGlobe Chief Executive Jeffrey R. Tarr said that during certain times of the year, it is capacity-constrained in certain regions. WorldView-3 should solve that problem, he said, allowing the company to generate more revenue from high-demand areas that, before WorldView-3, could not be fully satisfied.

Fully one-half of the company’s anticipated near-term growth will come from satisfying this pent-up demand, Tarr said.

Another 25 percent of future growth will come from the increased price DigitalGlobe expects to charge for 30-centimeter imagery compared to lower-resolution images.

The remaining 25 percent of growth will be from new products.

DigitalGlobe lobbied the U.S. government for the right to sell higher-resolution imagery long and hard, saying the company is unable to compete with mainly small aerial-imagery operations around the world – all of them selling imagery with a resolution of 30 centimeters or better.

Tarr said DigitalGlobe already wins 75 percent of the competitions it enters against other satellite-imagery providers, a figure that suggests there is not much upside for increasing market share. A percentage of customers for satellite imagery prefer wider-swath imagery for environment-monitoring, for example.

Aerial imagery is a new market, however. How far, and how quickly, DigitalGlobe can penetrate it will be one measure of whether the relatively small global satellite imagery business can expand into new areas.

For the 12 months ending Dec. 31, Longmont, Colorado-based DigitalGlobe reported revenue of $654.6 million, up 6.8 percent from the previous year mainly because of a 10.4 percent increase, to $395.3 million, in U.S. government business.

The company’s commercial business managed a 1.8 percent increase in revenue, to $259.3 million, despite the collapse of the Russian market in 2014.

Revenue from Russia dropped by $14.5 million in 2014, some of it owing to political tensions with the West over Ukraine – with Russia, not the United States, apparently seeking to reduce commercial dealings with a U.S. image provider – and partly because of the collapse of the Russian ruble on foreign exchange markets.

For 2015, the company expects revenue to increase by around 13 percent. The EnhancedView contract with NGA and its increased payments will be the main reason, but Tarr said DigitalGlobe expects to see a lift from non-U.S. government customers in the latter half of this year.

One new product for the 10 nations that are now direct-access customers of DigitalGlobe, with their own image-reception Earth stations, will be to enable these customers to access the full DigitalGlobe constellation without needing dedicated ground terminals for each satellite.
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