DigitalGlobe eyes $400 million market for high-res images

Fri May 23, 2014 6:55am EDT

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(Reuters) - For satellite imagery provider DigitalGlobe Inc, a $400 million-a-year global market awaits as soon as the United States relaxes regulations on the sale of higher-resolution images.

That day cannot come soon enough for the only provider of commercial satellite images in the United States. Until then, DigitalGlobe cannot use its technology to full effect, Chief Financial Officer Yancey Spruill told Reuters in an interview.

"There is a market opportunity with a roughly $400 million addressable market that we cannot participate in today because of the regulatory regime of our government," Spruill said.

Longmont, Colorado-based DigitalGlobe sells satellite images used by governments and companies such as Google Inc to make maps. It also provides imaging services and satellite monitoring for mining and oil companies.

DigitalGlobe has waited almost a year since applying with the U.S. Department of Commerce for a license to sharpen the resolution of its images to 25 cm from 50 cm - the difference between being able to identify a car and the make of that car.

Satellite image providers in other countries are as yet unable to provide such high-resolution images, Spruill said, but they are catching up - an argument used by DigitalGlobe in trying to persuade Washington to relax its rules.

The argument appears to be gaining traction. DigitalGlobe's shares have risen more than 10 percent since April 15, when Director of National Intelligence James Clapper said U.S. intelligence agencies had agreed to allow commercial providers to sell higher-resolution images.

"Ultimately, whether we sell the imagery or foreign governments are going to have that imagery, it's going to happen because technology is evolving and foreign governments and companies are investing in that advancement," Spruill said.

The global market for high-resolution images is dominated by aerial surveyors such as Japan's Pasco Corp and Norway's Blom ASA, which use cameras mounted on aircraft to capture images with resolutions as sharp as 15 cm.

While satellite images are of lower resolution, they can be delivered faster and updated more frequently than aerial images.

They are also cheaper, because they do not involve the cost of hiring, fuelling and piloting planes: Andrea James, analyst at Dougherty & Co, said DigitalGlobe can sell imagery at $27 per sq km or less, compared with the $200 sometimes charged by aerial surveyors.

DigitalGlobe, which has a market capitalization of $2.3 billion, gets about 85 percent of its revenue from government contracts around the world. U.S. government contracts alone account for 58 percent.

Spruill said the company had identified Europe, Japan and the United States, which already have well-developed aerial imagery industries, as key growth markets.

DigitalGlobe, which had revenue of $613 million in 2013, has forecast revenue of $630 million-$660 million for the year ending December 31.

Analysts were expecting $645 million, according to Thomson Reuters I/B/E/S.

(Editing by Feroze Jamal)

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