Space X Takes 10 Percent Stake in Surrey Satellite Technology

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  Space News Business

Space X Takes 10 Percent Stake in Surrey Satellite Technology

By PETER B. de SELDING
Space News Staff Writer
posted: 31 January 2005
10:56 am ET


PARIS — Space Exploration Technologies Corp. Chairman Elon Musk said his purchase of 10 percent of small-satellite specialist Surrey Satellite Technology Ltd. (SSTL) will give SpaceX a window on the thinking of the world’s most successful vendor of small, inexpensive spacecraft and ultimately could provide business for SpaceX.

Musk said in an interview that he and SSTL reached an agreement on the 10 percent equity stake in about a month. The deal will give Musk a seat on SSTL’s board but does not include any guarantee that future SSTL satellites will use SpaceX’s Falcon vehicles.

The maiden flight of the Falcon rocket is scheduled for March.

Musk and SSTL Chief Executive Officer Sir Martin Sweeting said the investment should be seen as a marriage of two similar corporate cultures more than a financial deal. Both said SpaceX’s 10 percent purchase will not lead, at least in the short term, to a larger stake taken by the El Segundo, Calif., rocket maker.

“They could have accepted investments from just about anyone I think,” Musk said. “SSTL is a high-quality company that is probably the world leader in small satellites. We look at this as more a case of similar corporate cultures getting together. For now there is nothing firm about working together. But when you have two companies that see the world in the same way, they can usually figure out things to do together.”

SpaceX is trying to do for space-launch vehicles what SSTL has been doing for 24 years with satellites: prove that a vastly less-expensive alternative to today’s technology is feasible.

SSTL is owned by the University of Surrey in Guildford, England. After Musk’s purchase, the university will have an 84 percent stake in the company. SSTL employees hold the remaining 6 percent of SSTL’s shares.

With 23 satellites built and launched since 1981 and nine on order, SSTL has created a business out of making satellites that commonly cost less than $10 million each. The company posted a pretax profit of 1.3 million British pounds on revenues of 18 million British pounds for the fiscal year ending July 31, 2004. The company has been growing at an annual rate of more than 15 percent for the past couple of years and is forecasting a pretax profit of 1.7 million British pounds on sales of 25 million pounds.

SSTL has sought inexpensive launchers in many parts of the world and was among the first to use Russian and Ukrainian ballistic missiles that were being taken out of service and made available as orbital vehicles. Sir Martin said the company will continue to hunt for launcher deals wherever they occur. But he said that for the U.S. government, which has been an SSTL customer in the past and may be again, only a U.S.-based rocket is acceptable. That is one reason why SSTL wanted a U.S. partner. The company’s financial condition is such that it did not need new investment.

“We had about a half-dozen potential investors,” Sir Martin said. He declined to name them and also declined to say how much SpaceX paid for its 10 percent stake. “The deal with SpaceX was done more on the basis of strategic vision. Elon and I have a good relationship, and we wanted the relations between our two companies to be more of a marriage.”

Sir Martin said SSTL engineers have investigated the design of the SpaceX Falcon rocket and concluded that it could deliver on its promise of radically reducing the cost of space access. But Sweeting also said that Musk’s personal fortune, made in the Internet and software sector, is a crucial component of SpaceX’s chance of success.

“I’ve watched a lot of launchers come and go, and it is often the financing that stops them,” Sir Martin said. “Elon is the first guy to come along with pockets deep enough to get over the hump. He’s also got some very good people working with him, including some former SSTL people.”

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