Jean-Marc Nasr arrived at Spot Image in 2001, a time when the company was reeling from rapid changes in the global Earth observation market that he says threatened Spot’s existence.
Four years later, the Toulouse, France-based company has restructured its business model to feature channel partnerships that grant companies exclusive rights to sell Spot imagery in exchange for guaranteed annual revenues. It has permitted Spot to reduce its staff, particularly in the United States, and to concentrate its sales efforts where there are no partnerships.
The Spot 5 satellite has met its backers’ expectations of offering relatively high ground resolution without sacrificing swath width. The satellite collects imagery at ground resolutions of 2.5 meters and 5 meters.
Nasr, who left Spot Image in July to take up a new post inside the EADS group, spoke recently with Space News staff writer Peter B. de Selding.
How were sales in 2004, and how would you characterize Spot Image’s financial condition?
Revenues in 2004 were 56.5 million euros ($77 million using Dec. 31, 2004, conversion rate), a 13 percent increase over 2003. And at constant exchange rates, sales would have been 58 million euros. The dollar’s weakness in 2004 hurt us. Our U.S. business accounted for 6.3 million euros, and our Chinese business — remember the yuan is pegged to the dollar — was about 6 million euros. We have nearly doubled our sales in the past four years. The company has never been stronger.
And profitability?
We were profitable in 2004, and we are distributing a dividend to shareholders — our first one since 1999 and the crisis years. The dividend is modest, about 1.40 euros per share, for a total payout of 200,000 euros. But it’s symbolically important for us.
How does 2005 look?
Revenues for the first six months of the year are about 40 percent higher than what they were for the same period a year ago. So it’s a good start for the year.
The French space agency, CNES, finances the construction and launch of the Spot satellites. It also operates the satellites in orbit and provides some ground-network maintenance. How much does Spot Image pay for this?
The maintenance contract we have with CNES has been substantially revised. In 2005 we are paying 7.5 million euros for the service, compared to 3.4 million euros in 2004. So as of 2005, we are paying the full cost of the CNES maintenance and operations services. We are getting closer to financial independence.
Is it fair to say that the Spot 5 satellite, launched in May 2002, saved the company?
It’s not far off. We were boxed in by the U.S. government decision to offer basically free access to Landsat low-resolution imagery, and the U.S. government decision to permit global commercial sales of high-resolution imagery. We couldn’t compete with free images at the low-resolution end, and we had no product to compete with the emerging U.S. companies offering high-resolution data.
And if Spot 5 had failed at launch?
We would have been in serious trouble. Certainly the possibility was there that the company would shut down, or be absorbed by CNES.
If Spot 5 has been such a success, why didn’t you use today’s low-interest-rate environment to take out a loan to launch another high-resolution satellite on your own?
I am convinced that the day we can do that is fast approaching. We couldn’t have afforded another Spot 5, but in the past couple of years, EADS Astrium has been designing and selling high-resolution satellites that are much less expensive. Look at Formosat-2 for Taiwan, and Theos for Thailand.
One of my real regrets is leaving Spot Image before we were able to purchase our own satellite. But it’s going to happen, and it will prove wrong the people who thought there is no sustainable business model in selling Earth observation satellite data.
CNES is leading development of the two Pleiades high-resolution optical imaging satellites, to be launched in 2008 and 2009. Could you take advantage of this development and order a third Pleiades for yourselves?
This is something we’re looking at, but we still have some time before we need to decide. In any event, Pleiades — Spot will be the commercial sales agent, even if contract details have not been finalized with CNES — is going to be a great addition to our product line.
CNES and other French government interests own nearly 43 percent of your equity, with EADS at 40.1 percent, Alcatel at ||7.1 percent and the Swedish Space Corp. at 6.7 percent. Will this mix need to change if Spot is going to act more like a commercial company?
It’s possible. CNES has said it is willing to reduce its shareholding to a low level, perhaps even to zero, now that we are paying full price for the CNES maintenance services. EADS has said it is willing to become a majority shareholder. These things take time.
You have won the rights to market imagery from Formosat 2, the former Rocsat 2, outside Taiwan and China. What’s the appeal of this satellite for you?
Formosat 2 is in an unusual orbit for an Earth observation satellite in that it is low inclination, passing over the same swath of Earth with each orbit. It offers a daily revisit of very interesting places — the whole of the Middle East and North Africa, most of Asia, and it can swivel up to 45 degrees to either side quickly. We have very high hopes for sales from this satellite.
Korea’s Kompsat-2, or Arirang 2, is set for launch later this year. Are you going after rights to market that outside Korea?
We certainly are and we are not alone. There is a fairly heated competition going on now between us and some of our competitors over who will have the distribution rights for Kompsat-2.
Besides your channel-partnership policy and the arrival of Spot 5, what has changed to make you so optimistic about Spot’s future?
It’s several things. First is that we finally have enough satellites in orbit — not just Spot, but the U.S. companies, plus the Asian satellites — to offer a good revisit time. Image freshness matters just as much as sharpness, especially for some government users. Then you add the fact that satellite prices have come way down. And more recently, the non-governmental commercial market and Internet-related applications are arriving fast. A short while ago I visited Google to discuss business. That certainly wouldn’t have happened four years ago.
