SpaceDev Promises Shareholders Only Profitable Future Acquisitions

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Managers of small satellite and satellite component builder SpaceDev Inc. asked frustrated shareholders to show patience and promised that future acquisitions would include only target companies that already are profitable and able to immediately add to SpaceDev’s earnings.

In a March 31 conference call with investors, SpaceDev Chief Executive Mark N. Sirangelo said the U.S. military market and the broader global commercial market are moving in the direction of SpaceDev’s core capability, which is providing standardized micro- and nanosatellite platforms that can be tailored to the customer’s specific needs.

Sirangelo said Poway, Calif.-based SpaceDev might be viewed as a small, satellite industry version of computer manufacturer Dell, which builds core computer parts and then adds features based on customer orders.

SpaceDev’s stock, which is traded on the U.S. over-the-counter market, trades at just about the same price today as it did five years ago despite the fact that the company, helped by the Starsys purchase in 2006, has tripled in size in the period.

SpaceDev reported revenue of $34.7 million in 2007, a 6 percent increase over 2006. Gross profit margins improved to 25.4 percent of net sales as the company digested several fixed-price government contracts that have proved more costly than foreseen.

The net loss for the year narrowed to $272,000, from $973,000 in 2006.

U.S. government contracts accounted for 73 percent of SpaceDev’s revenue in 2007, down from 89 percent in 2006 as commercial business increased. “We continue to see a small but growing trend toward more commercial work,” Chief Financial Officer Richard B. Slansky said during the conference call.

Contract backlog stood at $29 million as of Dec. 31, 2007, up 3.5 percent from the same period a year earlier.

SpaceDev in October 2007 won a $3.75 million contract from the U.S. Defense Advanced Research Projects Agency (DARPA) for a 15-kilogram nanosatellite using SpaceDev’s solar thermal propulsion engine as part of DARPA’s High Delta-V Experiment.

Nearer term, SpaceDev was able to leverage work the company has done for the U.S. Missile Defense Agency into a contract with the U.S. Defense Department’s Operationally Responsive Space (ORS) Office for a launch that could occur this year.

Sirangelo said that when the Missile Defense Agency ran out of budgetary authority to continue funding the micro-satellite development, ORS picked up the same basic satellite bus for its Jumpstart mission, to be launched on a Falcon 1 rocket being built by Space Exploration Technologies Corp.

The Jumpstart mission’s goal is to test rapid integration and payload processing for satellites.

Sirangelo said SpaceDev is scouting potential acquisitions, but he said the company would limit its hunt to firms whose businesses would immediately add to SpaceDev’s profitability.

Slansky said SpaceDev still intends to grow its business, both internally and through acquisitions, over the course of the next several years. He declined to set specific growth targets.

SpaceDev in 2007 acquired a significant new shareholder in OHB Technology of Germany and OHB’s subsidiary, MT Aerospace, which purchased a combined 19 percent of SpaceDev’s stock.

SpaceDev and OHB, a satellite and rocket component manufacturer, hope the purchase gives each access into the other’s core geographic market. Sirangelo said it is too soon to assess what European markets SpaceDev could penetrate, and what U.S. government markets OHB could enter.

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