Orbcomm Proceeds with Caution Following Satellite Failure

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  Space News Business

Orbcomm Proceeds with Caution Following Satellite Failure

By PETER B. de SELDING
Space News Staff Writer
posted: 26 March 2009
04:27 pm ET






FRASCATI, Italy — Satellite two-way messaging service provider Orbcomm has declared one of the six satellites it launched in June a total loss following a power failure and said it will slow the entry into service of the other five to evaluate whether they may have a similar defect, the company announced March 16.

In a conference call with investors and a filing with the U.S. Securities and Exchange Commission (SEC), Ft. Lee, N.J.-based Orbcomm Inc. said the failure will not have a material effect on the company’s overall operations. Orbcomm has a constellation of 27 satellites, with six spacecraft operating in each of four orbital planes and the remaining used as in-orbit spares.

“We are working to develop operational procedures and software solutions to minimize the risk of a similar problem on another satellite,” Orbcomm Chief Executive Marc J. Eisenberg said in the conference call. “We are starting to put satellites into limited service, with a watchful eye on their condition and performance.”

In its SEC filing, Orbcomm said the other five satellites launched in June “have experienced outages of redundant power systems components that are being investigated.”

Orbcomm
said the failed satellite was not the U.S. Coast Guard-ordered demonstrator spacecraft designed to test an Automatic Identification System (AIS) service to permit coastal authorities to collect information on ships in their national territorial waters. The use of satellites permits authorities to collect information on ships that are too far out at sea to be identifiable from ground-based radars.

All six of the satellites launched in June are equipped with an AIS payload, and Orbcomm is under mounting competitive pressure to field an operational service and line up government customers worldwide before the competition arrives.

The six spacecraft were built by Polyot of Omsk, Russia, in a contract managed by OHB System of Bremen, Germany, an Orbcomm shareholder. Orbcomm had previously announced an attitude control anomaly on one of the satellites due to a malfunction of the satellite’s reaction wheels, an issue apparently unrelated to the power failure.

In its SEC filing, Orbcomm said the failure occurred Feb. 22. The company is taking a non-cash charge of $7 million, which it said is the value of the satellite.

Several satellite builders in
Canada
and
Europe
are working on AIS technology in hopes of securing a place in what they all say is a promising global market, hoping to minimize Orbcomm’s lead in service introduction with technology advantages or service commitments from their governments. Com Dev of Canada is building two AIS satellites and trying to lock in strategic partnership agreements with potential AIS service providers and co-investors.

The French, Norwegian and European space agencies also have entered the AIS arena with small industrial contracts to test satellite designs. OHB is one of those companies, leading a European consortium to design a system under contract with the European Space Agency.

Orbcomm
in January signed an AIS distribution agreement with Lloyd’s Register-Fairplay Ltd. of
Britain
, a terrestrial maritime information service provider. Details of the agreement were not disclosed, but Eisenberg said Lloyd’s Register has purchased a license for Orbcomm data and that the agreement “includes annual [purchase] minimums.”

Orbcomm
is building a second-generation constellation of satellites, also equipped with AIS payloads, with deliveries of the first 18 of these expected to start in 2010 and launches beginning in 2011. The satellites are being built by Sierra Nevada Corp. of
Sparks
,
Nev.
, under a May 2008 contract valued at $117 million. Eisenberg said
Sierra Nevada
, whose contract’s value is tied to construction milestones, has met all the milestones so far. Orbcomm has not yet selected a launch services provider for the second-generation constellation.

Orbcomm
Chief Financial Officer Robert G. Costantini said the company spent $40.3 million in 2008 building the second-generation constellation, launching the six satellites in June and moving its network operations center. For 2009, he said, Orbcomm forecasts capital expenditures will total no more than $30 million as it continues milestone payments on the second-generation contract.

Costantini
said that as of Dec. 31, the company had $81.2 million in cash and restricted cash.

Eisenberg said Orbcomm’s current cash position, plus cash from operations expected in 2009, will be enough to meet the company’s needs. “We do not currently anticipate a need to access the capital markets as we move through these difficult economic times,” Eisenberg said.

Orbcomm
reported 2008 revenue of $30.1 million, a 6.9 percent increase over 2007. Eisenberg said he was disappointed with the figure, which he said reflects the difficult environment for selling Orbcomm subscriber gear. But the company’s growth priority is for services revenue, which in 2008 grew by 34.4 percent, to $23.8 million.

Eisenberg said Orbcomm’s 2009 priority is maximizing its position as “the only company in the world with a commercially available space-based AIS data offering” by expanding its international and
U.S.
government customer base beyond the U.S. Coast Guard contract, which relates to a single satellite.