Second-generation Orbcomm Satellites Delayed Until Late 2011

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PARIS — Satellite messaging service provider Orbcomm, whose first-to-market position in ship identification and machine-to-machine communications is being challenged by competitors, said its second-generation constellation of 18 satellites has fallen behind schedule and will not start launching until late this year.

The Fort Lee, N.J.-based company said just two of the second-generation spacecraft will be launched late this year aboard a Space Exploration Technologies (SpaceX) Falcon 9 rocket. The launch date depends on Hawthorne, Calif.-based SpaceX’s progress with the launch’s main payload, a cargo carrier intended for the international space station.

After this first launch, it will be up to 12 months before a second launch, carrying between eight and 12 Orbcomm satellites, will occur, also aboard a Falcon 9, Orbcomm Chief Executive Marc J. Eisenberg said May 13.

In a written response to Space News inquiries, Eisenberg said Orbcomm has decided not to exercise an option with satellite prime contractor Sierra Nevada Corp. for up to 30 more second-generation satellites pending an assessment of market demand.

“Adding satellites reduces response time,” Eisenberg said. “Eighteen OG2 [second-generation Orbcomm satellites] will provide a better response time” than the current constellation of 27 satellites, in part because the new satellites will be placed into a higher-inclination orbit relative to the equator.

“Today’s business would be well supported by 18” satellites, Eisenberg said. “Capacity will be greatly enhanced. We exercise the options if there is demand for greater response time or additional functionality.”

In a May 10 filing with the U.S. Securities and Exchange Commission (SEC), Orbcomm said it let pass a May 5 deadline to exercise its option for more satellites with Sierra Nevada and is now negotiating with the manufacturer on a possible deadline extension, and on new pricing terms.

Orbcomm said Sierra Nevada has already missed multiple milestone deadlines in the construction of the 18 second-generation satellites, and that the two companies “are in discussions regarding the impact of such a delay, but do not expect an impact on the SpaceX launch services schedule.”

Orbcomm’s May 2008 contract with Sierra Nevada for the 18 satellites and related services is valued at $117 million. Orbcomm had paid $42.1 million of this sum as of March 31 and expects to pay another $13 million in 2011, the SEC filing said.

The Orbcomm contract with SpaceX for the launch of these 18 satellites is valued at $46.6 million, of which $10.1 million had been paid as of March 31. No further payments are scheduled for 2011.

Eisenberg said the payments made so far to SpaceX have covered the launch of four satellites. The next payment, he said, will be timed to occur before the second launch. He said Sierra Nevada has given indications that delivery of satellites will be made in time for the second Falcon 9 Orbcomm launch, in late 2012. He said Boeing, which with its Argon ST subsidiary is a major subcontractor to Sierra Nevada on the Orbcomm contract, “has been a positive influence on the payload program.”

Orbcomm’s principal business is providing machine-to-machine links for short messages. The company’s biggest customers are heavy-equipment manufacturers including Caterpillar, which in recent months has accounted for nearly a quarter of Orbcomm’s revenue; Komatsu; Hitachi Construction Machinery; and Asset Intelligence, a former unit of General Electric.

The machine-to-machine market is now the focus of a major effort by operators of two low-orbiting satellite constellations that once focused mainly on voice links — Globalstar of Covington, La., and Iridium Communications of McLean, Va.

But the company had created a new market in space-based Automatic Identification System (AIS) data delivery from maritime vessels to coastal authorities, allowing port officials to assess ships on their way to port without waiting for the vessels to come within range of ground-based coastal radars.

Orbcomm’s lead in this new AIS market has been compromised by the in-orbit failure of satellites launched with AIS terminals. Canada’s Com Dev has since invested in its own AIS technology and begun launching satellites.

All the second-generation Orbcomm satellites will be AIS-equipped. With the launch of these satellites now delayed, Orbcomm has contracted with OHB Technology of Bremen, Germany, and OHB’s LuxSpace subsidiary of Luxembourg, to launch two small satellites dedicated to AIS.

The first of these two LuxSpace-built satellites is intended to operate in an equatorial orbit and is scheduled for launch this summer aboard an Indian PSLV rocket. The second, to operate in polar orbit, does not yet have a firm launch date, Eisenberg said.

The loss of Orbcomm’s earlier AIS-equipped satellite in late 2010 deprived the company of about $700,000 in revenue during the first three months of 2011, Orbcomm said in its SEC filing. The company reported total revenue of $7.9 million, up 6.3 percent over a year ago. Service revenues, which are more important than equipment revenue to Orbcomm, were up 7.5 percent, to $7.4 million.

Removing the lost AIS business from the first-quarter calculation results in a service-revenue increase of 19.7 percent compared with the same period a year ago, Orbcomm said.