[...] first became interested in GeoEye (GEOY) after reading a blog entry over at Old School Value, and was especially attracted by the fact that GeoEye’s major customer [...]

[...] Majority of revenues coming from one product – refer to AeroGrow, GeoEye [...]

That is what I call a constructive comment

Well I do believe the $500M is relevant because if the satellite costs $500M and with the market cap today at $400M, a competitor, conglomerate or anyone could come along and make an offer for the company and instantly they would be the owner of potentially 3 satellites, its operations, ground stations and other lines of business, where it took at least 4 years to build each satellite.

Yes you are right in that the government is the biggest customer. Revenues from the government accounted for 55% and this is where the risk lies. If the government decides to reduce their orders then profits will take a big hit.

What I did not mention in the post was that GeoEye and DigitalGlobe both receive assitance from the government through a program called NextView. It is the National Geospatial Intelligence Agency (NGA) that supports them in the development of their satellites as well as awarding guaranteed contracts to purchase their images for the next 12-18 months with new contracts that can be awarded.

Although the NGA is the major purchaser, other government agencies that purchase these images are “Department of Agriculture, the Department of Commerce, the Department of Interior, the Department of State, the Department of Transportation, the Department of Treasury and many independent agencies that include the EPA, FEMA and NASA among others.”

Also, a lot of GeoEye’s revenues come from international customers where most countries dont have the satellite capabilities as the US. Since the satellites can images areas not accessible by planes due to air space restrictions, this is a growing section. International accounted for 36% and the order backlog is growing.

It’s also due to privacy and security reasons that GeoEye cannot sell images with a greater resolution that 0.5m but other than that, they are free to sell images to anyone ever since the US Government implemented such a policy in 1994.

Sorry for the long response, but my fault for leaving out lots of info.

Regarding cash flow projections, I took an approach where I assumed GeoEye-1 was launched and FCF growth was very pessimistic at 7%.

Phew, hope that answers a lot of your questions.

Just caught this post via VIN. Your website looks great.

Regarding the GEOY idea, I have a few questions. The fact that the GeoEye-1 cost $500M is irrelevant, as this is a sunk cost. The main question is what cash flow will result from this $500M investment. It seems to me that the government is the only major customer for this type of high-resolution imaging, (do correct me if I’m wrong; I’m new to this company), and thus GEOY is subject to governmental whims. While the Pentagon has committed to a $1 billion expenditure to buy commercial images, assuming that this is split between DG and GEOY, then this merely recovers the cost of the satellite, leaving no profit. Furthermore, a number of factors may cause Pentagon to cease its support for GEOY including 1) the military already possesses higher resolution satellites, and plans to launch more of these satellites, 2) a new presidency/defense secretary may decide that satellite imagery is of less use in the age of terrorism, especially in light of current budgetary concerns, 3) data security concerns preclude the extensive use of commercial companies etc. The Pentagon is likely to want to support commercial satellite imaging, but this “support” is unlikely to mean giving outsized profits to GEOY. Most likely, a profit that covers the cost of capital is all that can be expected.

Again, I’m ignoring all civilian applications, mainly because I can see very few, and none that can provide an adequate return. Imagery at a resolution of several meters is sufficient for most purposes. Google is a company that may be able to toss $20-30M at GEOY just to be able to say that they have the highest resolution (and this will raise privacy concerns), but this alone is not an adequate return. What are your cash flow projections for this company? Again, please feel free to correct me if I missed something big. Thanks.

[...] School Value and some GEOY [...]

@Chris
Sent you an email. Would gladly read,discuss your report and provide comments

This is Chris Fernandez from PeakStocks.com.

I wanted to say that I appreciated your kind words and the attribution of your GeoEye post to me where appropriate.

I looked on your site for a contact form, but I guess like me, you don’t want to get spammed, so here’s hoping you check your comments.

I would love to chat with you some more if you are interested in GeoEye, I have a full research report written up on it that I am preparing to sell on my website for subscribers, but would like to offer it to you to read to 1) save you time in your own research, and 2) give me some constructive feedback and collaboration in the future.

I didn’t include my email address in this post for obvious reasons, but please visit: PeakStocks.com, and simply scroll down to the bottom of any page and click on the “Contact me” link.

Shoot me off a quick message, and we can set up a time to talk!

Thanks again, and keep up the good work, the site looks really clean and professional, and I like the direction it is headed!

Take care,
Chris

Best Wishes,
D4L

[...] [...]

@Sam Hyung
Nice nickname haha

@El Burro
Thanks for the correction and yes Worldview-2, if that is the satellite you are referring to, will take color images. I need to look more into who has the better business. GeoEye or DigitalGlobe.