UPDATE 2-DigitalGlobe IPO price $19, above range-source

* DigitalGlobe IPO prices at $19 per share, above range

* Morgan Stanley ownership in co. to fall to 32 pct (Adds details on rival's launch, DigitalGlobe's satellite, and byline)

By Phil Wahba

NEW YORK, May 13 (Reuters) - DigitalGlobe Inc (DGI.N), a satellite image company primarily serving the U.S. government, priced its initial public offering at $19 per share on Wednesday, above the estimated range, according to a source familiar with the deal.

DigitalGlobe, which is based in Colorado and supplies images to Google Maps and Microsoft's Virtual Earth, sold 14.7 million shares, according to the source, raising $279.3 million in a deal led by underwriters Morgan Stanley (MS.N) and JP Morgan (JPM.N). The price estimate range had been $16 to $18.

The company, which generated about 75 percent of its revenue from U.S. government contracts last year, is set to have a third satellite launched into orbit by Boeing Co (BA.N) in early autumn to replace one of its two satellites that is expected to reach the end of its operational life next year.

"If their WorldView-2 satellite is successful in the fall, it will nearly double their collection," said Scott Sweet, senior managing partner of advisory firm IPO Boutique.

This increased capacity will allow DigitalGlobe to reduce its reliance on government contracts, Sweet said.

"With the launch of this satellite, their market share will get bigger and they will get a toehold in areas outside of government, with most growth coming from corporate clients," Sweet said.

But satellite launches have not always been successful. A satellite DigitalGlobe sent into orbit in 1997 suffered a power system failure, causing a loss of communications four days after launch, and another in 2000 never achieved orbit, according to a regulatory filing.

Smaller glitches can also become a problem for a company -- wreaking havoc on its shares. DigitalGlobe's chief rival GeoEye Inc (GEOY.O) saw its stock sink as much as 24 percent on Tuesday after it disclosed that a small portion of some images from one of its satellites lacked color.

DigitalGlobe, whose IPO is the fifth on a U.S. exchange so far this year, gathers images daily through its two satellites and maintains them in its library.

The company's sales rose 82 percent to $275.2 million in 2008, net income fell by nearly half to $53.8 million because of a tax expense, according to the filing.

About 90 percent of the IPO's proceeds will go to existing shareholders, including Morgan Stanley, whose ownership of the company will drop to 32 percent after the IPO, according to a filing.

The company plans to start trading Thursday on the New York Stock Exchange under the symbol "DGI" (DGI.N). (Reporting by Phil Wahba; Editing by Richard Chang, Bernard Orr)