Investing

Are Meteor Showers True Risks To Satellite Companies? (BA, DGI, GEOY, GILT, DISH, DTV, SIRI, HUGH, ICOG, IRDM, GSAT, ORBC, ORB, LORL)

There is a low-probability event cresting today and tomorrow that could pose risks to businesses that rely upon the availability and operations of satellites in orbit.  This comes annually via the Perseid Meteor Shower that has started over the last weekend.  Space.com noted “The peak of this year’s Perseids is forecast to come during the afternoon hours on Thursday… a single observer might count anywhere from 60 to 100 per hour.”

The Perseid meteor shower is what is left of Comet Swift-Tuttle that last visited the inner solar system in 1992.  Each year in August Earth passes through a debris field left along the orbit of the comet.  Most debris items are the size pebbles or sand grains, but they enter Earth’s atmosphere at about 37 miles per second or 133,000 MPH.  In short, nothing physical responds too well if it is hit by debris.  That includes satellites, the space station, space craft and so on.  If you don’t trust that this is a risk, all you have to do is look in the annual reports of any major satellite company.  Again, it is a low risk, but a risk nonetheless.

There are many companies that could be affected if debris from a meteor shower were to make contacts with any of the satellites.  The Boeing Company (NYSE: BA), DigitalGlobe, Inc. (NYSE: DGI), GeoEye, Inc. (NASDAQ: GEOY), Gilat Satellite Networks Ltd. (NASDAQ: GILT), Dish Network Corp. (NASDAQ: DISH), DIRECTV (NASDAQ: DTV), SIRIUS XM Radio Inc. (NASDAQ: SIRI), Hughes Communications, Inc. (NASDAQ: HUGH), ICO Global Communications Holdings Ltd. (NASDAQ: ICOG), Iridium Communications Inc. (NASDAQ: IRDM) and Globalstar Inc. (NASDAQ: GSAT) and ORBCOMM, Inc. (NASDAQ: ORBC) are all likely monitoring their birds with a little more caution during this Perseid show.  There is also Orbital Sciences Corp. (NYSE: ORB) and Loral Space & Communications, Inc. (NASDAQ: LORL).

DISH Network notes, “Meteoroid events pose a potential threat to all in-orbit satellites. The probability that meteoroids will damage those satellites increases significantly when the Earth passes through the particulate stream left behind by comets. Occasionally, increased solar activity also poses a potential threat to all in-orbit satellites…. The loss, damage or destruction of any of our satellites as a result of an electrostatic storm, collision with space debris, malfunction or other event could have a material adverse effect on our business, financial condition and results of operations.”

On this front, DIRECTV notes in its annual report, “In-orbit risks include malfunctions, commonly referred to as anomalies, and collisions with meteoroids, other spacecraft or other space debris….. In the event of a complete satellite failure, our services provided via that satellite could be unavailable for several days or longer while backup in-orbit satellites are repositioned and services are moved. We are not insured for any resultant lost revenues.”

The Boeing Company (NYSE: BA) claims to be the world’s leading manufacturer of geostationary satellites and it manufactures satellites for all walks of the satellite world.  It recently acquired Argon ST in the satellite arena.  Unless many satellites were simultaneously knocked out or damaged, Boeing is too large and too diversified to get any major benefit from the possibilities of satellite woes based on meteor showers.

Two other companies in the satellite manufacturing and servicing businesses that are direct pure-plays in the satellite industry are Orbital Sciences Corp. (NYSE: ORB) and Loral Space & Communications, Inc. (NASDAQ: LORL).  Both companies are small enough ($1.44 billion market cap at Loral and $777 million at Orbital) that any new business as a result of repositioning, relaunching, or reordering of new satellites would actually be a win for either or both of these two.

DigitalGlobe, Inc. (NYSE: DGI) and GeoEye, Inc. (NASDAQ: GEOY) were two recent winners that hit all-time highs after the two received $7.3 billion in combined orders to supply satellite imagery to U.S. intelligence services.  Digital Globe has commercial high-resolution earth imagery products and services that are sourced from its own advanced satellite constellation.  GeoEye sells international information services to government and commercial markets.

Dish Network Corp. (NASDAQ: DISH) and DIRECTV (NASDAQ: DTV) compete head to head for in-home and in-office satellite ‘cable’ TV subscribers.  Each has hundreds of channels.  Dish had 14.1 million subscribers at the end of 2009 versus DIRECTV’s 18.5 million U.S. and 6.5 million in Latin America.  As of the end of 2009, DIRECTV had a network of 12 geosynchronous satellites and it appears that DISH had more when you include its leased satellites.

Gilat Satellite Networks Ltd. (NASDAQ: GILT) is an Israel-based company which provides Internet Protocol (IP) based digital satellite communication and networking products and services worldwide.  The company was founded in 1987 and has shipped over 750,000 VSATs (Very Small Aperture Terminals) to more than 85 countries on six continents.

SIRIUS XM Radio Inc. (NASDAQ: SIRI) is satellite radio monopoly and it ended the latest quarter with some 19,527,448 subscribers.  It has multiple satellites between it and the XM network and any single satellite would likely only result in some interruption.  Still, any ‘event’ would not be a welcome wagon for Mel Karmazin and friends.

Hughes Communications, Inc. (NASDAQ: HUGH) offers up broadband satellite network services and systems for broadband Internet services via commercial-grade antennas. The company also provides satellite, wire line, and wireless communication networks and services to all business sectors around the globe.  The company had about 326,000 subscribers on SPACEWAY 3 as of June 30, 2010 and it has shipped more than 2.2 million systems to customers in over 100 countries.  In short, satellite ‘interruption,’ damage, or destruction would not be welcome.

ICO Global Communications Holdings Ltd. (NASDAQ: ICOG) was founded in 2000 to launch and operate a global constellation of communications satellites to support voice and data services to mobile, portable and fixed devices.  This is still a developing company where its DBSD North America unit is being restructured and the company will be a minority shareholder upon that completion.  The company recently completed a $30 million rights offering and the stock has never really taken off and its remaining ten partially completed MEO satellites were placed in storage when construction was suspended in 2004.  It has a case against Boeing which it won a $603 million claim, but that is on appeal and is expected to be concluded next year.

Iridium Communications Inc. (NASDAQ: IRDM) and Globalstar Inc. (NASDAQ: GSAT) are two of the satellite phone service providers that provide satellite audio and data communications.  Globalstar has recently taken delivery of the first three second-generation satellites from manufacturer Thales Alenia Space and is expecting three more later this month for what it hopes will be an October launch.  With over 400,000 subscribers, Globalstar claims to be the world’s largest provider of mobile satellite voice and data services.

ORBCOMM, Inc. (NASDAQ: ORBC) is a smaller player that operates satellite-based data communications for a two-way wireless data messaging system optimized for narrowband data communications via about 29 low-Earth orbit satellites.  It is into space-based Automatic Identification System services.  It announced this week that its total revenues for the June quarter were $7.8 million.  Despite a 15.8% revenue jump, its satellite network would have to face multiple strikes to really interrupt operations and the odds of that are so low that it is hard to fathom.

Most likely there will be no major fallout from this.  If there is, it will be costly.  To date, meteor showers and debris showers have brought mostly entertainment at night under clear skies.

JON C. OGG