Paris, France: GeoEye will not make its previously announced revenue target for 2011, mainly because its biggest customer, the US government, is slowing its contract award process in the face of budget pressures, GeoEye officials said in a conference call with investors, Space News reported.
During the call it was also learnt that an unnamed European customer that had been expected to make a large order has decided to scrap the idea, at least for now, and that the company’s international business this year in general is not performing as well as hoped.
Further complicating GeoEye’s 2011 picture is the performance of its M.J. Harden aerial imagery unit, which depends in large part on contracts from state and local governments whose budget picture is in some cases even worse than that of the US government. The company is reviewing the costs associated with the M.J. Harden operation and may ultimately decide to sell it.
During the call, the officials opined that they expected their gross profit margin to remain around 50 percent. But revenue will be about 5 percent lower than the company had forecast in August, totalling between USD 348 million and USD 355 million in 2011. It is expected to grow by 5 percent from there in 2012, GeoEye Chief Financial Officer Joseph F. Greeves said during the call.
Led by the US National Geospatial-Intelligence Agency (NGA), the US government accounts for about two-thirds of GeoEye’s total revenue. GeoEye Chief Executive Matthew O’Connell said the US government revenue came up short in the three months ending Sept. 30 for several reasons. First, the delay in the adoption of a fiscal-year 2011 budget caused NGA and other government customers to delay production orders to GeoEye.
It takes several weeks for these orders to be filled and the revenue booked. O’Connell said the production orders have arrived, but many came too late to add to third-quarter revenue, a phenomenon that will cut full-year 2011 revenue as well. GeoEye’s newly purchased Analytics division is suffering from the same problem, he added.
“The delay was a surprise,” O’Connell stated. “We underestimated the degree to which the [US government budget debate and enactment delays] would delay the granting of new contract awards.” He nonetheless said GeoEye investors should view this as a temporary slowdown, not something that suggests zero growth in the coming months.
Source: Space News