Satellite Services Provider Globecomm Downlinks a Record Profit

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PARIS — Satellite services and hardware provider Globecomm Systems reported Sept. 9 record revenue and gross profit for the year ending June 30 and dismissed speculation that the company may be offering itself for sale.

Hauppauge, N.Y.-based Globecomm said its services business, which has been a center of growth in recent years, increased revenue by 39 percent for the 12 months ending June 30 compared with the same period a year ago.

The infrastructure business of selling antennas and other communications gear to commercial and military customers declined by 7 percent as Globecomm continued to struggle with a NATO contract. The company said the contract’s revenue will arrive as expected, but not until the current fiscal year, when Globecomm delivers the gear.

Globecomm reported fiscal year 2011 revenue of $274.2 million, up 20 percent from a year ago and a company record. The services segment was nearly 70 percent of the total.

In a Sept. 9 conference call with investors, Globecomm said EBITDA, or earnings before interest, taxes, depreciation and amortization, was up 62 percent and was equivalent to 12 percent of revenue.

With the NATO and U.S. government contracts expected to provide a stable revenue stream in 2012, and with two acquisitions in the past two years also contributing, Globecomm forecasted that growth will accelerate, increasing by 40 percent, with EBITDA at between 11 percent and 12 percent of revenue.

Globecomm manages services through satellite capacity it leases, usually on short-term contract. The company has about 2 gigahertz of satellite capacity under lease, which is equivalent to a large satellite.

Over the summer Globecomm was the subject of market speculation that the company would follow competitors CapRock and Segovia and offer itself for sale to a larger entity involved in providing satellite services, especially to the U.S. government.

Globecomm Chief Executive David E. Hershberg, who in the past has said Globecomm is able to grow without a larger corporate parent, waved aside the speculation and advised investors to pay it no attention. He declined further comment on the subject.

On the contrary, Hershberg said, Globecomm is hunting for strategic acquisitions of its own.

Globecomm in 2011 created a Globecomm Maritime division from four existing subsidiaries. The company is targeting what it believes will be substantial long-term growth in the delivery of hardware and services for satellite broadband access aboard maritime vessels.

Hershberg said Globecomm is especially focused on the potential for VSAT, or very small aperture terminal, satellite applications in the maritime sector. Up to now, he said, VSAT maritime installations have been sluggish, in part because London-based Inmarsat is anticipating the threat and is lowering prices for Inmarsat’s Fleet Broadband product line, which uses L-band to deliver throughput that is much slower than conventional broadband but faster than Inmarsat’s previous product.

Longer-term, Inmarsat is addressing the VSAT challenge in the maritime sector by ordering Ka-band satellites that will operate alongside Inmarsat’s L-band product line.

Globecomm has made a specialty of Ka-band gear, and Hershberg said given the number of Ka-band satellites, for military and commercial use, that are being launched, a wave of orders for Ka-band terminals from maritime customers cannot be far behind.

Globecomm Maritime also provides L-band service for Inmarsat and Iridium Communications for customers that call for it. The company now has some 2,500 ships as customers.

“We have a number of bids out there for VSAT” for prospective maritime customers, Hershberg said. “We are confident [this market segment] will go up. Inmarsat understands this, which is why they have reduced their rates. So it’s getting more competitive.”

For land-based Ka-band, Globecomm has won a contract with Hughes of Germantown, Md., to design, build and test Ka-band Earth stations in the United States. Broadband provider Hughes, which has already moved many of its U.S. customers to Ka-band, is launching a large Ka-band satellite in 2012.