Rebounding Economy Boosts Orbcomm’s Fortunes

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PARIS — Satellite two-way messaging service provider Orbcomm said its core markets of commercial truck fleets and heavy-equipment vehicles are rebounding with the broader economy and that its new maritime vessel identification and tracking service — which the company views as a major growth opportunity — is also gaining traction.

The Fort Lee, N.J.-based company, which operates a constellation of 29 satellites, said it has sufficient cash on hand to fund the construction and launch of its 18 second-generation satellites, to be placed into low Earth orbit starting in early 2011.

In a May 10 conference call with investors and in a filing with the U.S. Securities and Exchange Commission (SEC), Orbcomm officials said the company is having discussions with startup launch-services provider Space Exploration Technologies (SpaceX) on whether Orbcomm’s small satellites could be launched as secondary payloads on SpaceX’s medium-lift Falcon 9 rocket.

Hawthorne, Calif.-based SpaceX is under a $46.6 million contract with Orbcomm to launch the 18 second-generation Orbcomm satellites between early 2011 and early 2014 on SpaceX’s smaller Falcon 1e vehicle.

Orbcomm Chief Executive Marc J. Eisenberg said in a May 11 e-mail that Orbcomm remains committed to SpaceX but understands that the company is still in the startup phase. If SpaceX is unable to perform the Orbcomm launches, Orbcomm will search for other vehicles that could carry at least some of its satellites, also as secondary payloads.

Sierra Nevada Corp. of Sparks, Nev., is building the 18 second-generation Orbcomm satellites under a contract valued at $117 million that includes an option to build 30 more. Eisenberg said in the conference call that construction of the satellites is on track for an initial launch in the first three months of 2011.

Orbcomm’s key markets of commercial trucking fleets and heavy equipment took a beating in 2008 and 2009 with the global recession. Its four biggest customers — each accounting for between 11 percent and 14 percent of Orbcomm’s revenue — are Caterpillar, Komatsu, Hitachi Construction and AI, the former Asset Intelligence division of General Electric.

Eisenberg said the recovering economy is beginning to show its effects in demand for Orbcomm subscriber terminals. The company said it added 10,000 new subscribers in the first three months of 2010, reaching a total of 525,000 terminals as of March 31.

Some 75 percent of the new subscribers were to Orbcomm’s satellite service rather than for its terrestrial cellular service. Orbcomm forecasts that as the economy continues to improve, the company will register new subscriber additions of perhaps 5,000 per month.

In early April, Orbcomm purchased a minority stake in Alanco Technologies Inc. of Scottsdale, Ariz., whose StarTrack Systems subsidiary builds dual-mode cellular-satellite terminals. Eisenberg said Alanco was previously using a more expensive alternative to Orbcomm that relied on a geostationary-orbiting satellite coupled with terrestrial-cellular links.

Once the Alanco relationship is producing Orbcomm products late this year, Orbcomm should see a new market opening in tracking refrigerated rail cars, where Alanco has a dominant market share, Eisenberg said.

Aside from asset tracking, Orbcomm in 2008 began a service that provides information on maritime traffic. The Automatic Identification System (AIS) on two of the six satellites Orbcomm launched in 2008 that are in service for AIS has begun generating revenue from a contract with the U.S. Coast Guard.

Eisenberg said Orbcomm has signed contracts with 12 other partners for AIS service. AIS service revenue in the three months ending March 31 totaled $700,000, compared with $400,000 in the same period a year earlier.

Orbcomm’s second-generation satellites will all be equipped with AIS terminals. Orbcomm is competing with several companies and governments in Europe and Canada that are also developing AIS satellite systems.

Orbcomm reported revenue of $7.4 million for the first three months of 2010, up 10.5 percent over the same period a year earlier. The operating loss of $368,000 compares with a loss of $8.6 million a year ago.