Orbcomm Sees M2M Industry Standard Emerging from Partnership with Inmarsat

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PARIS — Satellite machine-to-machine (M2M) messaging services provider Orbcomm on Nov. 7 said its strategic partnership with mobile satellite services provider Inmarsat will help standardize the still-chaotic M2M industry and give Orbcomm a global presence.

Orbcomm, whose second-generation satellite constellation has been delayed while awaiting the qualification of a new rocket, said the first eight second-generation satellites are now likely to be launched in March or April.

Hawthorne, Calif.-based Space Exploration Technologies Corp. (SpaceX) has placed Orbcomm in third or fourth position on the Falcon 9 v1.1 manifest. Once the first eight satellites are placed into low Earth orbit, a second SpaceX launch, of the nine remaining satellites, will occur some nine months later.

Rochelle Park, N.J.-based Orbcomm, which has made a series of acquisitions in the past couple of years to broaden its product offering and customer base, said it had 827,000 billable subscriber communicators as of Sept. 30, up 11 percent from a year earlier.

The early-October purchase of the Sensor-Enabled Notification System (SENS) business from Comtech is expected to add 20,000 subscribers.

Orbcomm’s second-generation constellation includes Automatic Identification System (AIS) terminals on each spacecraft to appeal to coastal authorities seeking information on ships when the vessels are outside the range of coastal radars.

Orbcomm said its AIS revenue totaled $750,000 in the three months ending Sept. 30 and that commercial customers have stepped in at a time of vacillating government revenue due to the U.S. government’s budget cuts.

The recent acquisitions make it more difficult to measure Orbcomm’s underlying growth. For the three months ending Sept. 30, Orbcomm reported $19.7 million in total revenue, up 22 percent from a year ago. 

The figure included a big jump in hardware sales — up 75 percent year on year, to $5.9 million — that the company said was caused by an earlier-than-expected payment from several customers. With that revenue being booked, the hardware revenue total for the next three months likely will be much lower, Orbcomm said.

Services revenue, which is a more important metric for Orbcomm, was up 8 percent in the three months ending Sept. 30, to $13.8 million. The company attributed the increase to a mix of its heritage business with revenue coming from new acquisitions.

Announcing their strategic partnership Nov. 4, London-based Inmarsat and Orbcomm said the partnership joins the strength of the largest mobile satellite services provider and its global reach with the current leader in the fast-growing M2M business.

In a Nov. 4 conference call held by both companies, Inmarsat Chief Executive Rupert Pearce dodged a question of why Inmarsat does not purchase Orbcomm outright.

But the two-phase relationship outlined by Pearce and Orbcomm Chief Executive Marc J. Eisenberg suggests that, given the economies of scale in the satellite industry, a merger is one possible outcome.

In the Orbcomm conference call on Nov. 7, Eisenberg said Orbcomm and Inmarsat are working on next-generation modems that could be “snapped on” interchangeably to users’ mobile assets. Inmarsat operates in the L-band part of the radio spectrum, and Orbcomm’s second generation uses VHF frequencies. Orbcomm’s second-generation modem is scheduled for production starting late this year, while Inmarsat’s is set to be introduced in early 2014.

Eisenberg said that Inmarsat, which is a former intergovernmental organization in business since the late 1970s, has a global reach with licenses to operate in places Orbcomm as yet cannot reach, such as Russia and China.

The two companies will collaborate on product development and distribution of M2M devices, creating a de facto industry standard that Eisenberg said is sorely lacking among M2M suppliers.

When Orbcomm’s and Inmarsat’s M2M businesses are combined, he said, “three-quarters of the [mobile satellite services] industry focused on M2M will have access to the same standards,” Eisenberg said.

Phase 2 of the partnership will evaluate how the two companies’ satellite systems might be coordinated.

With a coordinated billing procedure depending on whose customers and whose modems are generating the business, and a willingness to merge their M2M strategies, the two companies may end up separate in name only if a merger is not decided. 

 

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