GeoEye’s CEO said increased U.S. government demand for satellite earth imagery “kind of swamped” the company’s effort to diversify its business with more commercial and international income.
“I think one thing that affected both of us was demand grew so fast on the U.S. government side that it kind of swamped the efforts to create more commercial and international revenue,” GeoEye CEO Matt O’Connell told Defense Daily in recent interview, referring to both GeoEye and rival DigitalGlobe [DGI]. “We’re proud of the way we diversified, we’re proud of the growth of our international and commercial (business). It’s just U.S. government demand grew more.”
DigitalGlobe in July agreed to buy GeoEye, its main United States government competitor in the satellite earth imagery and geospatial analysis market, after the National Geospatial-Intelligence Agency (NGA) informed GeoEye it would not exercise the full year EnhancedView contract for this year starting Sept. 1 (Defense Daily, June 26). This prompted both companies to make repeated efforts to acquire each other before, ultimately, DigitalGlobe agreed to buy GeoEye for $900 million in stock and cash (Defense Daily, July 24).
O’Connell said once he became GeoEye CEO in 2006, the company became “very successful” at growing the commercial side of the business and diversifying. O’Connell said when he first arrived GeoEye was “purely focused” on operating satellites and selling the imagery. Upon his arrival, O’Connell said GeoEye dramatically expanded its value added production and acquired a geospatial analytics company formerly known as SPADAC, which is now known as GeoEye Analytics and based in McLean, Va.
“We’ve been very successful at growing the commercial side of the business and we’ve also been very successful at diversifying,” O’Connell said.
O’Connell said it is hard to tell if there will be any GeoEye layoffs if the merger goes through, which O’Connell believes is still on track to occur late this year or in early 2013. He said one of the goals of the combined company is to generate new products, and to do that, you need smart people.
“There may be some redundancies in some functions, let’s not kid ourselves,” O’Connell said.
The merger is also contingent on shareholder approval, which O’Connell thinks is attainable.
“Having a deal like this where your stock goes up right after you announce it is a very positive sign,” O’Connell said. “We don’t think that shareholder approval should be too hard.”
Since the merger was announced July 23, both companies are up, as of Wednesday. GeoEye is up $6.37 on NASDAQ while DigitalGlobe is up $5.31 on NYSE.
O’Connell also said it was too early to tell what would happen to GeoEye’s flight control center in Herndon, Va. “I think it is beneficial to have a backup facility,” O’Connell said. But, he reiterated, “I think it is something they are considering, it’s just too soon to tell on all those decisions.”
O’Connell said he has no “real plans” for post-merger life if the merger goes through.
“I think I’ll take a little time and figure out what to do next,” O’Connell said, though he said he’s been contacted by companies only to tell them “give me six months.”