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Space Imaging satellite negotiations fizzle

In a blow to Space Imaging, the plug on negotiations to award the spy satellite company a contract worth potentially $500 million was taken off. The unexpected collapse in the secret talks between Space Imaging and a Pentagon spy agency immediately raised questions about the Thornton company’s future. The privately held company employs about 300. A deal would have been a huge boon for Space Imaging and a lift to Colorado’s fledgling commercial spy satellite industry.

Space Imaging executives had hoped an award would allow them to build and launch a next-generation commercial spy satellite to replace their one aging satellite already in orbit. Officials at Space Imaging and the Pentagon’s National Geospatial-Intelligence Agency declined to spell out why the negotiations failed. The discussions had been ongoing since January. The Pentagon, a big buyer of commercial satellite imagery, had used the company’s photos during the Iraq war. Space Imaging must now look for alternative ways to bankroll a new satellite.

Spokesman Mark Brender said the company was “greatly disappointed” with the NGA decision. He added it was “premature at this time to talk about any layoffs” at the company.

Space Imaging’s existing satellite, named Ikonos, is expected to survive until 2007. That’s also the earliest Space Imaging has said it could deploy a next-generation satellite capable of photographing objects 1 to 2 feet across. Last September, the company’s chief rival, DigitalGlobe in Longmont, won a $500 million-plus NGA contract – called NextView – by outbidding Space Imaging. After the award, the NGA said it would pursue talks with Space Imaging about a possible second NextView deal.

Asked about suggestions that the failure to land the latest contract could doom Space Imaging, spokesman Brender said: “We have the ‘brainwidth’ and the bandwidth to withstand these stormy seas. We hope the weather clears and we can see our way ahead soon.” In suburban Maryland, outside Washington, D.C., NGA spokesman Dave Burpee also was vague: “After some careful deliberations, we have determined that it is in the best interests of the government to terminate the discussions.” Burpee stressed the decision was not meant to convey an “adverse inference” about Space Imaging or its next-generation satellite program. “In fact, we welcome and encourage their participation in any future competitive acquisitions.”

The agency had said it hoped to conclude the talks one way or the other by the end of February – although that wasn’t a firm deadline. The talks spilled into March. Space Imaging’s Brender said last week the company had hoped to tie up a deal by the end of this month. The breakdown was a surprise. Last October, the NGA’s director, retired Air Force Lt. Gen. James Clapper, said it would be wise to have at least two civilian spy satellite companies as “sort of an insurance policy.” Space Imaging and DigitalGlobe are considered the top suppliers of commercial satellite imagery.