DigitalGlobe: A New Era Of Satellite Imagery Begins

| About: DigitalGlobe, Inc. (DGI)


The global satellite imagery market is expected to increase from $2.05 billion in 2012 to $5.01 billion in 2019.

In June 2014, the U.S. government eased its restriction on commercial satellite imagery. The resolution limit has been changed from 50 centimeters per pixel to 25 centimeters per pixel.

Recently, DigitalGlobe launched WorldView-3 satellite having a resolution of 31 centimeters per pixel. The company plans to launch WorldView-4 in mid-2016 having a resolution of 30 centimeter per pixel.

DigitalGlobe will benefit as it can deliver high quality images to government agencies as well as technology companies like Google.

Satellite imagery has applications in the energy, agriculture, natural resources, insurance, and construction industry. The global satellite imagery market is expected to increase from $2.05 billion in 2012 to $5.01 billion in 2019. In June this year, the U.S. government eased its restriction on satellite imagery to customers other than the U.S. government. Effective from 2015, the resolution limit has been changed from 50 centimeters square (or cm) of ground space per pixel to 25 cm per pixel, which will improve quality of satellite images.

Recently, DigitalGlobe (NYSE: DGI) launched its commercial imagery satellite WorldView-3 to capture better images of the earth from space. WorldView-3 has a specified mission life of seven and a quarter years, with an estimated service life of 20 years. The satellite will photograph 680,000 square kilometers (or km) per day. The planned orbital height of the satellite is 617 km, which will give it images with resolution of 31cm per pixel. If the satellite flies at a lower height, then it can generate images with resolution of 25cm per pixel. The satellite has short-wave infrared sensors, which enables it to generate images regardless of cloud or smoke cover. DigitalGlobe will start selling satellite images post six month operation of WorldView-3 in space. The company also plans to launch commercial imagery satellite WorldView-4 in mid-2016, which will provide images with resolution of 30 cm per pixel. DigitalGlobe is now lobbying the U.S. government to ease the resolution restriction to 10 cm per pixel.

DigitalGlobe derives more than 80% of its revenue from government agencies including the U.S. government. In July this year, the National Geospatial Intelligence Agency extended the service level agreement (or SLA) portion of DigitalGlobe's Enhanced View contract for the period of September 1, 2014 to August, 2015. With the launch of WorldView-3, the company will receive additional $50 million per year from the National Geospatial Intelligence Agency. Under a multi-year, multi-million dollar contract, DigitalGlobe will provide archived imagery of the country to the United Arab Emirates government.

In February 2014, DigitalGlobe signed a multi-year deal with Google (NASDAQ:GOOGL) (NASDAQ:GOOG) to provide the company with high satellite imagery, which will improve the capabilities of Street View, Google Earth, Google Maps, and its other services. Last month, Google started direct selling its aerial imagery, which will help its customers to own images and use it for business purpose. Google Maps for Business allows customers to purchase and use Google Earth imagery by giving them access to high-resolution aerial imagery covering the continental U.S. This program doesn't cover Google's satellite imagery. I expect that Google will start selling its satellite imagery once it receives high quality images from DigitalGlobe.

In June this year, Google acquired Skybox Imaging for $500 million to support Google Maps. Skybox launched SkySat-2 satellite in July this year, which operates in the orbit 450 km above the earth surface. The satellite has a resolution of 90 cm in black-and-white mode, and 2 meters in color mode. SkySat-2 satellite can capture 90-second video clip at 30 frames per second. Space Systems is building a fleet of 13 small sized high resolution satellites for Skybox Imaging. These satellites will be launched between 2015 and 2016, and have capability to capture earth images twice a day. Once these are operational, Skybox will launch more satellites to create a 24 satellite constellation by 2018, which will capture earth images thrice a day. Skybox Imaging mines one terabyte of data daily and its association with Google will increase its capabilities further. The resolution of WorldView-3 is better than existing fleet of Skybox which gives it an added advantage. Once Worldview-4 is launched, the resolution of images provided by DigitalGlobe will improve further. The drawback with DigitalGlobe's satellite is that they are 10 times costlier and heavier compared to Skybox's satellites, which increases the launching cost.


I would conclude by saying that DigitalGlobe will benefit with the launch of WorldView-3 satellite as the company can provide high resolution images to government agencies as well as technology companies like Google.

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