DigitalGlobe Opens Up 21% Post-IPO
By Lynn Cowan, WSJ, May 14, 2009, 10:26am ET
DigitalGlobe Inc. had a successful IPO launch Thursday morning, with the satellite imagery firm's stock rising 21% on its first trade.

DigitalGlobe's early performance follows the same trajectory of the four initial public offerings that preceded it this year, and appeared on track to seal its status as the fifth IPO to make first-day gains in 2009.

The stock opened at $23 a share on the New York Stock Exchange, up from its $19-a-share IPO price. A total of 14.7 million shares were sold at a price above its expected range of $16 to $18, which was set by underwriters Morgan Stanley and J.P. Morgan Chase & Co. It was trading recently at $21.82 a share, up 15% from its IPO price.

Analysts say that a big draw for investors is DigitalGlobe's steady stream of revenue from government contracts, as well as the expected launch of a new satellite this fall that will nearly double its imagery collection capability.

"There is always hunger for a company with significant visible top line revenue growth with good margins," said Francis Gaskins, president of research site IPODesktop.com. "It's going to be mid-year 2009 pretty soon, so people are going to be looking into 2010 for companies whose top-line revenue have a chance of popping."

Of the shares sold, almost all -- 13.3 million -- came from private investors in the company, so those proceeds won't benefit DigitalGlobe. Among the sellers were founder Walter S. Scott, now the company's chief technical officer; Ball Corp., a packaging and aerospace company located about 15 miles away from DigitalGlobe's Longmont, Colo., headquarters; and a private equity unit of underwriter Morgan Stanley.

DigitalGlobe, which is poised to benefit from the Obama administration's plans to use more commercial satellite imagery for intelligence gathering, came public just three days after rival GeoEye Inc. reported rising revenue and a wider net loss related to the costs associated with a new satellite's operations. GeoEye's stock fell 13% afterward, but has since regained some of its losses.

DigitalGlobe, which currently has two satellites in orbit, plans to launch a third this fall. In 2008, its revenue rose 81% to $275 million and operating income more than doubled to $92 million, compared with a year earlier, although tax expenses knocked its net income 44% below 2007 levels. In the first quarter of 2009, revenue declined 2% as sales slowed in its smaller commercial customer segment, and net income went down 25% as compensation expenses rose compared with the same period a year ago.

DigitalGlobe derived three-quarters of its 2008 revenue from the U.S. government, and says demand is increasing for its satellite images from all its customers -- from emerging foreign countries updating maps to Google Inc.'s mapping features.