DigitalGlobe and GeoEye Complete Merger

The merger of the country’s two commercial satellite imagery companies, DigitalGlobe and GeoEye, is now complete.   DigitalGlobe President Jeffrey Tarr said the merged companies have a market capitalization of $2.1 billion.

Tarr said that the merged companies are “even better positioned to meet customers’ needs and create value for shareowners” and “poised to achieve our vision of being the leading source of information about our changing planet.”

The merger was forced by the government’s decision to reduce funding for commercial satellite imagery purchases in light of budget constraints and reduced demand for this type of satellite imagery with the scaling down of the Afghan conflict.

Though referred to as commercial companies, both GeoEye and DigitalGlobe have been heavily dependent on the government as a market for their high resolution satellite imagery.  A series of contracts over the past decade under the auspices of the National Geospatial-Intelligence Agency (NGA), part of the Intelligence Community, assured the companies of sufficient revenue to build new satellites and remain solvent as they sought to develop non-government markets. 

Last year, however, NGA informed GeoEye that it would not continue supporting the company under the most recent contract, EnhancedView, signed in 2010.   The Senate Armed Services Committee attempted to come to GeoEye’s rescue, but by the time the FY2013 National Defense Authorization Act reached the final stages of negotiation in late December, the die was cast.

From a space policy perspective the government’s decision to discontinue its arrangement with GeoEye is an opportunity to extract lessons learned about public-private partnerships in commercial space.  The growing number of companies looking to the government to help fund their space systems and serve as a market for their wares also might be well served to recalibrate expectations.   Policies are good, but they are often trumped by budgets.