Orbcomm Touts Recovery of Satellite-based Ship Identification Business

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PARIS — Satellite messaging service provider Orbcomm said it has won back customers of its ship identification service following the successful launch of two microsatellites and is confident that its full second-generation constellation of 18 satellites will be in orbit by 2014 despite delays associated with its primary launch provider, Space Exploration Technologies Corp. (SpaceX).

Fort Lee, N.J.-based Orbcomm said its current 27-satellite constellation continues to provide full commercial service despite having passed its contracted in-orbit service life.

The first second-generation Orbcomm satellite is now scheduled to be onboard the second launch of SpaceX’s Falcon 9 rocket carrying the SpaceX Dragon cargo carrier to the international space station. This launch is tentatively scheduled for later this year, Orbcomm Chief Executive Marc J. Eisenberg said.

The remaining 17 second-generation satellites will be placed into orbit aboard two or more Falcon 9 vehicles. These launches have not been scheduled but are expected to occur by 2014, Orbcomm said in a submission to the U.S. Securities and Exchange Commission.

Orbcomm said it has yet to negotiate an amended contract with Hawthorne, Calif.-based SpaceX that would replace the original $46.6 million contract, under which SpaceX was to launch the Orbcomm constellation aboard Falcon 1 rockets. Falcon 1 operations have been shelved as SpaceX focuses on the larger Falcon 9.

The much-delayed first launch of SpaceX’s Dragon cargo freighter to the space station is now scheduled for late April, according to SpaceX.

In a March 15 conference call with investors, Eisenberg said the satellite has been moved to the next Dragon flight, which he said would occur sometime in 2012.

Orbcomm operates a fleet of 27 satellites in low Earth orbit that were launched between 1997 and 1999 with a forecasted design life of between nine and 12 years. Orbcomm has modified the satellites’ operations to save on battery life and reiterated its confidence that, even with the launch delays, the first-generation spacecraft will provide satisfactory commercial service until the arrival of the second-generation fleet.

The 18 second-generation satellites are under construction by Sierra Nevada Corp. of Sparks, Nev., under a $117 million contract. As part of that contract, Sierra Nevada had agreed to provide Orbcomm with a $20 million line of credit.

Orbcomm exercised that option in late February.

Orbcomm Chief Financial Officer Robert G. Costantini said during the conference call that the company still expects to be able to finance the deployment of the second-generation satellites through its internal cash flows, and that “there is no need at this time to use the facility. It provides an insurance policy” against a future possible cash shortfall, he said.

In addition to providing faster throughput for larger messages, the second-generation satellites all are equipped with Automatic Identification System (AIS) terminals to provide ship tracking and identification services to maritime authorities.

The satellites take data from shipboard terminals that are now required by maritime regulatory authorities. The ship terminals communicate with ground-based antennas. Adding a satellite-based AIS capacity gives coastal authorities access to ship whereabouts and cargo data even when the vessels are in mid-ocean beyond the reach of the land-based antennas.

Orbcomm and exactEarth of Canada, owned by Canada’s Com Dev and Hisdesat of Spain, are racing to establish their positions in the AIS market. Both companies have launched AIS-dedicated satellites.

Faced with the delays of its second-generation satellites, and with the in-orbit failure of six gap-filler spacecraft built by a Russian manufacturer, Orbcomm secured the use of two microsatellites for AIS service. The two satellites, called VesselSats and built by LuxSpace of Luxembourg, are now operating. The first was launched in October and placed into an equatorial orbit, while the second, in service since January, is in polar orbit.

These two spacecraft are both performing well and have put Orbcomm back into the AIS business for the first time since late 2010, when its satellite failures ended the existing AIS contracts.

“We have brought back every significant customer” for AIS, Eisenberg said. “There are more than 20 out there. The significant ones are back.”

Orbcomm has granted its previous AIS customers a substantial discount for 2012 but nonetheless expects that revenue line to provide a substantial boost to the company’s sales for the year, Eisenberg said. He did not forecast revenue levels.

Orbcomm said its base of billable subscriber units totaled 628,000 as of Dec. 31, up 12.7 percent from a year earlier. Revenue in 2011 totaled $46.3 million, up 26.3 percent from 2010. The revenue total included some $4.8 million from StarTrak, a company Orbcomm purchased in May for $18.2 million.

A second purchase, of PAR Logistics Management Systems for $6.1 million, is more recent and did not contribute to the 2011 results.

Both acquisitions will solidify Orbcomm’s position in the market for carrying merchandise — refrigerated and otherwise — by truck.

Orbcomm said it had cash amounting to $84.3 million as of Dec. 31.

 

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