PARIS — Two- way satellite messaging provider Orbcomm Inc. has restarted its planned initial public stock offering (IP0) and is telling prospective investors that the company will reach cash flow break-even status once it has 375,000 subscribers and that it is likely to pass the one-million-subscriber mark by the end of the decade.
Ft. Lee, N.J.-based Globalstar is expected to conduct its IPO on the U.S. Nasdaq stock exchange the week of Oct. 30. The IPO seeks to raise a net of $108 million from the sale of 11.15 million shares of stock at an average price of $12 to $14 per share.
In presentations to investors, Orbcomm’s management said none of the company’s officers, directors or major shareholders would be selling shares in the IPO. The IPO proceeds will be used to invest in Orbcomm’s next-generation satellite system.
The company says it will be able to deploy its second-generation satellites for $6 million each, including launch. It has six new satellites on order from its former parent company, Orbital Sciences Corp. of Dulles, Va., with the satellites’ platforms and launch provided by shareholder OHB-System of Bremen, Germany. OHB has contracted with Polyot of Omsk, Russia, for the launch of the experimental satellite on a Polyot-provided Cosmos rocket.
These six satellites are scheduled for launch in 2007, with another 18 satellites in the second-generation constellation to be launched starting in 2008.
That launch of the experimental satellite, previously set for late 2006, slipped to early 2007 when Orbcomm’s IPO, announced in May, was delayed.
Orbcomm operates a fleet of 30 satellites in low Earth orbit used for two-way messaging, mainly machine-to-machine links, for owners of fixed and mobile assets seeking updates on the health and whereabouts of their goods. Its satellites cover the entire planet and Orbcomm has operating licenses in 75 nations. It recently received U.S. regulatory approval to operate 1 million terminals in the United States; its previous license permitted 200,000 terminals.
Orbcomm reported that as of Sept. 30 it had 199,000 fee-paying subscribers, compared to 113,000 at the end of 2005. New, lighter-weight and less-expensive terminals built by Delphi Automotive Systems LLC and introduced in late 2005 now sell for $100 when purchased in bulk, compared to the $280 units sold in 2003, Orbcomm Chief Marketing Officer Marc Eisenberg said in a W eb cast to investors.
Orbcomm in October signed its largest-ever contract with GE Asset Intelligence LLC, a division of General Electric, for the delivery of up to 412,000 Orbcomm subscriber terminals through 2009, with 270,000 of those under firm contract. According to its Web site, GE owns 1.5 million tractors, trailers, rail cars and marine containers that it leases and rents to customers in more than 30 countries. The company uses satellite technology to help its customers monitor and manage those assets
In an Oct. 19 IPO registration with the U.S. Securities and Exchange Commission (SEC), Orbcomm said the GE contract’s value is $57 million if the full complement of terminals is delivered.
Marc Eisenberg said that in addition to Orbcomm’s 199,000 current subscribers, another 19,900 subscribers have been pre-billed for service that has not started. A further 72,000 subscriber modems have been purchased but are not yet in service. Assuming the GE order is fully exercised, that would give Orbcomm more than 700,000 current and planned subscribers, he said.
Orbcomm Chief Financial Officer Robert Constantini said the company has a goal of 4 million subscribers generating $250 million in annual revenues. Ultimately, he said, Orbcomm will post gross-profit margins “on a par with the best operators in the satellite business,” which would mean better than 70 percent.
That is a long way from where the business is today.
Orbcomm reported sales of $15.5 million in 2005 and $12.6 million for the first six months of 2006. Net losses for 2005 were $9.1 million, with a net loss of $5.4 million reported for the first half of 2006.
Its revenues have been split between sales of equipment and of services, with the services side expected to grow quickly in the coming years. Orbcomm generates $5 to $6 per month in subscriber revenues.
Orbcomm Chief Executive Jerry Eisenberg said in the investor W eb cast that the market for two-way machine-to-machine communications for asset tracking is expected to grow to more than 400 million units by 2012. He said the company could capture 10 percent of that market.