Penny Stock Space Technology

Aug 16th, 2007 | By Jim Nelson | Category: Technology

Satellite imagery is used in everything from natural resource exploration and production to intelligence. If you are unaware of what exactly this is, it can be summed up in three words — pictures from space.

Of course, everyone knows the story of the first satellite in space, Sputnik. And everyone knows of President Reagan’s “Star Wars” missile defense program. But not everyone knows the story of satellite imagery, or its importance…

In 1972, NASA launched the Earth Resources Technology Satellite (ERTS), later renamed U.S. Landsat 1. This state-of-the-art satellite was equipped with two types of cameras to capture different kinds of data. The first was a camera system called the Return Beam Vidicon (RBV). This camera soon malfunctioned, causing the entire satellite to lose altitude control for a while. The second camera system was called the Multi-Spectral Scanner (MSS) built by General Electric. A much more advanced version of this system is still used today.

The reason all of this is important is because of the end uses of this kind of imagery. Oil and gas explorers use it to find new fields. Emergency response planning along with city planning use it to map out better planned routes and infrastructures. Even the federal government uses it for intelligence and sure, even espionage. Check out this picture from last summer from where the North Koreans set off the rocket tests:

Currently, there are only two major players in this imagery game (outside of NASA) — DigitalGlobe (privately owned) and GeoEye (GEOY: NASDAQ).

DigitalGlobe was the first to receive a license to put up a commercial imaging satellite in 1992 and finally did in 2001 after a few failed attempts. GeoEye was formed out of an acquisition of Space Imaging by ORBIMAGE in January 2006. This acquisition completed the massive consolidation of this industry, leaving only these two competing companies (one public and one privately-owned).

In 1994, President Clinton issued a policy allowing U.S. companies to commercially market imagery products and systems, which set up the current technology that brings us Google Earth and Microsoft Virtual Earth.

In 2003, President Bush issued a directive for federal government agencies to rely more on satellite imagery companies to provide them with images. With this latest directive, the race was on for the best technology in this field.

Both companies are racing to get the first, next-generation satellite online. DigitalGlobe is launching the first of two for the company on September 18, 2007. GeoEye is also launching their new satellite sometime this quarter.

This new technology gives each company half-meter imagery, meaning if there is an object larger than two feet wide, it will be able to be identified from space.

In this age of terrorism and war, this technology will be vital to the military, and they know it. Recently, GeoEye received a contract from the U.S. government for $23.9 million worth of satellite imagery. DigitalGlobe is also working on government contracts.

Both companies are depending entirely on the success of these satellites. DigitalGlobe has only been able to get one of the three satellites they sent up to work. Maybe that is why they are planning a second, next-generation satellite launch early next year.

Either way, GeoEye is in a competitively better state right now. With huge National Geospatial-Intelligence Agency (NGA) contracts and others from Microsoft and Yahoo! for commercial imagery, GeoEye should be able to stave off the competition of DigitalGlobe.

Nonetheless, this is something to watch in the near future. Satellite imagery is not going anywhere. People are relying on it more and more for things as simple as getting directions. Large mining companies depend on it for exploration. And the U.S. government is spending at least $50 million this year alone on it for intelligence.

We’ll just have to keep our eyes on this one…

Sincerely,
Jim Nelson
August 16, 2007

P.S.: There are so many different uses for this technology, yet not many people even know about it. This is exactly the kind of thing my fellow editor, Chris Mayer, writes about to his readers all the time…

His Mayer’s Special Situations newsletter has become so popular that our publisher is making him double the price of it. This isn’t a surprise, though…75% of the picks he made this year are up, as I write this.

Jim Nelson

Jim Nelson is the managing editor of Penny Sleuth. He has been playing the stock market since he was 14, always with a preference toward smaller companies. He has honed his stock picking skills at Agora Financial since 2004, effectively combining a growth and value approach. Like Greg Guenthner, Jim also contributes to Penny Stock Fortunes on top of bringing you the Penny Sleuth every weekday.

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