“DigitalGlobe says they provide more quantity at lower cost,” O'Connell says. “We have higher-end imagery. I guess in a budget environment like this, NGA is more focused on the quantity.”
GeoEye's stock plunged almost 23% following the investor call. But O'Connell says GeoEye has enough money to complete GeoEye-2 and loft it next year, and that he is optimistic NGA will not renege on its 2013 SLA.
“They're paying us $180 million, so we think they're going to want it,” says O'Connell, referring to the 0.34-meter-resolution panchromatic imagery that GeoEye-2 is expected to deliver. “I'm not sure that what's happening in 2013 is indicative of what could happen in 2014,” he says, suggesting that whatever funding disaster awaits in 2013 could be partially reversed if NGA exercises a subsequent SLA option the following year.
In the interim, O'Connell says, the goal is to start cultivating commercial and international customers in the market for high-resolution optical data. In the first half of this year, the company expanded its presence in the U.S. and Europe. In June, GeoEye announced an expansion of its facilities in Tampa, Fla., home to the U.S. Special Operations and U.S. Central commands, in an effort to keep pace with what the company says is growing demand for its services across the military.
Globally, GeoEye says its sales network comprises a dozen strategic business partners, both government and commercial, and more than 100 resellers. In January, GeoEye expanded that presence to Europe, where it had relied on a single Italian distributor, Telespazio. GeoEye also has set up offices in Amsterdam, staffing it with five people working to develop a European reseller network through which to market and sell GeoEye-2 imagery. The company says it now has sales resources on the ground in more than 12 of the top EU countries accounting for roughly 90% of Europe's GDP.
Without U.S.-government waivers issued on a case-by-case basis, however, GeoEye is restricted from selling anything better than 50-cm-resolution imagery to commercial or international customers. O'Connell says the company already “fuzzes” its high-resolution optical data products to distort resolution for commercial and international sales. Another option is to raise the orbit of a satellite, which affords more imagery at diminished resolution. But it could also lower NGA's interest in GeoEye's products, O'Connell says.
“The more likely scenario is we negotiate a waiver for some of our biggest military customers and allow them to engage in contracts similar to what the NGA had for certain hotspot areas,” O'Connell says.
But the competitive landscape for GeoEye is more challenging now that its long-term competitor, Astrium GEO-Information Services, is taking delivery of two high-resolution Pleiades Satellites. With a ground sampling resolution of 70 cm, Pleiades will put Astrium on better footing to compete globally. Astrium also plans to loft its Spot 6 and 7 satellites in the coming year to provide imagery at 2.5-5-meter resolution.
In the meantime, at least two of the six congressional panels that oversee the NGA have expressed support for funding both EnhancedView contracts. O'Connell points out that both the Senate Armed Services Committee and the House Permanent Select Committee on Intelligence recently supported continued funding of EnhancedView, recommending that cuts proposed in the Obama administration's fiscal 2013 spending plan be restored in whole or in part in the forthcoming fiscal year.
“In his 2013 budget request, the president cut a certain amount of money, and we are restoring some of that for the 2013 budget,” a House intelligence subcommittee aide says.