Budget uncertainty led to merger: Matt O” Connell

Budget uncertainty led to merger: Matt O” Connell

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US: In his first interview after the acquisition of GeoEye by DigitalGlobe, CEO Matt O’Connell told Washington Business Journal, that federal budget cuts were a huge factor in Herndon-based GeoEye”s decision to be acquired by its primary competitor.

But the result will be a whole that is greater than the sum of its parts, O’Connell added, even as he is forced to move on and the Washington-area workforce experiences what he expects will be a modest shake-up.

Hints by Congress that it would delay or trim GeoEye’s fiscal 2013 funding under a USD 7.3 billion programme of the National Geospatial-Intelligence Agency, called EnhancedView, played into the company’s decision to be acquired by DigitalGlobe Inc., whose own portion under the same contract will not be affected by planned funding adjustments.

“That was a huge factor” in the decision to sell announced in July, O’Connell said, estimating that the USD 3.8 billion, 10-year EnhancedView contract to provide high-resolution, wide-area imagery to the NGA accounted for about 60 percent of the company’s USD 350 million in revenue in fiscal 2012.

“We had a great run. We generated a lot of value for investors. But this budget is a serious issue, and unfortunately, that made the future too uncertain for shareholders and employees both at GeoEye and DigitalGlobe,” he added. “It was clear that what we could do is put both companies together and have a compelling opportunity to diversify the customer base,” shrinking revenue for DigitalGlobe from the federal government from 63 percent to about 50 percent of its overall business.

“DigitalGlobe has always been bigger and had a better contract with the U.S. government,” O’Connell added. “At the end of the day, it was a tough decision. But you do what’s right for the shareholders. You have to.”

As for the Washington- area workforce of 430 employees, divided between two locations in Herndon and Tysons Corner, O’Connell expects modest changes once the acquisition goes through, likely in the fourth quarter of this year or early 2013. He also predicts that the two locations will be consolidated within the next few years.

“We lost the coin toss, and DigitalGlobe will run it out of Colorado,” he said. “There will be some impact – let’s not kid ourselves. But a lot of employees will stay in Northern Virginia. Some of the back-office functions – we’ll figure out where they end up. And they don’t want the useless overhead guys like me because I’m too expensive.”

Source: WBJ