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Improvising Around A Disaster
The first of the U.S. Air Force’s AEHF (Advanced Extremely High Frequency) communications satellite was launched on August 14th. It achieved its initial orbit, but then it was discovered that its main maneuvering rocket, needed to get the six ton satellite into its permanent fixed, 36,000 kilometer, orbit, was not working. Efforts to get the main engine going failed. The engineers then went to work and found a way to use the lower thrust maneuvering rockets to still the AEHF bird into position. But the alternate method will be slower, and take about nine months. That’s a small price to pay for a satellite that is supposed to last 14 years, once you get it in the right position. AEHFs will replace the older MILSTAR birds, providing more abundant and reliable (jam-resistant) communications. Two more AEHFs are under construction, with one going up next year and another in 2012. Several more will be ordered if the first three (costing about $2.2 billion each) perform as expected. The cost of the first three includes development costs, so additional ones will cost less than half as much.
While the AEHF are mainly to facilitate communications between headquarters in the United States and troops abroad, they are also up there to deal with the huge increase in wireless devices the troops are using. For example, the number of military radios has nearly tripled, to over 900,000, in the last decade. There has also been a huge increase in data transmission capability (“bandwidth”) from 46 megabits (million bits) per second in late 2001, to nearly ten giga (billion) bits per second now. This is just for troops in CENTCOM (the Middle East and Afghanistan). That’s 200 times more data being pushed through three times as many “wireless devices” (radios). This doesn’t even count the many cell phones and laptops used by troops in the combat zone, which often use civilian bandwidth. But it hasn’t been enough.
The major consumer of all this new bandwidth is live video being generated by the increasing number of vidcams on the battlefield. These vids are being exchanged by the units cooperating in an operation. This huge growth in bandwidth began in the 1990s, when the U.S. armed forces moved to satellite communications in a big way. This made sense, especially where troops often have to set up shop in out of the way places and need a reliable way to keep in touch with nearby forces on land and sea, as well as bases and headquarters back in the United States. At the time of the 1991 Gulf War, there was enough satellite bandwidth in the Persian Gulf for about 1,300 simultaneous phone calls. Or, 12 megabits per second. But while the military has a lot more satellite capacity now (the exact amount is a secret), demand has increased even faster. UAV reconnaissance aircraft use enormous amounts of satellite capacity. The Global Hawk needed 500 megabits per second, and Predators about half as much. The major consumer of bandwidth is the live video.
UAVs have other sensors as well, as do aircraft. A voice radio connection only takes about 240 bytes per second, and each of the multiple channels needed to control the UAVs use about the same. But it adds up, especially since the military wants high resolution video. At the moment, the U.S. has far more demand for satellite communications than it can support. As a result, not all the Predator and Global Hawk UAVs in combat zones have sufficient bandwidth to send their video back to the United States. Data compression and using lower resolution is often necessary, or using satellite substitutes (aircraft carrying transponders) to send the video to local users. The substitutes are becoming more common, simply because there is neither the money, nor the time, to get sufficient satellites into orbit.
While the larger UAVs need satcomm to send video back to the United States, most of the bandwidth demand now is for local use. Tanks, helicopters and aircraft are all sending and receiving more vids, maps and data of all sorts. AEHF is needed to get essential material to higher headquarters as quickly as possible. The basic idea is to keep everyone connected, all the time. More radios, and other wireless devices are on the way, as well as more features any Internet user would recognize, all available while under fire. AEHF is an essential link in this data chain.
www.strategypage.com
Inmarsat’s profits are booming.
During an economic downturn most companies’ profits will take a beating whilst their managers have to batten down the metaphorical hatches to pull through what is a period of great uncertainty.
The few businesses which prosper during a recession are those whose characteristics are particularly well suited to hard times such as debt collectors, insolvency practitioners and discount retailers like Poundland.
So it is a bit of a surprise to find a high-technology business which has positively thrived during the recent global recession. In the last two years Inmarsat (LSE: ISAT), the provider of satellite telecommunications services, has managed to increase its turnover by 80% whilst its earnings per share have risen by two-thirds.
Recession. What recession?
Inmarsat’s performance is no fluke; the company is still growing strongly as its results for the first half of 2010 showed, with earnings per share increasing by over 40% compared to the same period in 2009.
If Inmarsat can produce this sort of performance during a recession, a big question is much better might the company’s performance be when the world economy starts to power ahead?
Naturally this means that Inmarsat’s shares aren’t cheap and this is reflected in a PE ratio of 31. But since Inmarsat’s sales, profits and dividend have doubled since it floated on the stockmarket in 2005, realistically you its shares wouldn’t be sitting in the bargain bin!
The business
Inmarsat owns and operates a network of eleven geostationary satellites through which its customers make satellite telephones calls and access the internet from almost anywhere on the surface of the Earth. Consequently its main customers are organisations which operate in what the company describes as “the remote environment market” such as the military, mining and oil companies, aid agencies and shipping (both commercial and recreational).
You can find more background information on Inmarsat in my article from last December.
In June Inmarsat started selling its first global handheld satellite telephone, the IsatPhone Pro, to good reviews. Intriguingly commentators on sailing websites have remarked that the IsatPhone Pro’s calling costs can sometimes be cheaper than those of some conventional mobile phone networks.
While the current range of satellite phones won’t replace most people’s mobile phones, if only because they won’t fit into your jeans or shirt pocket, it’s quite possible that they may directly compete with mobile phones one day.
Inmarsat’s satellite network represents a considerable barrier to entry for potential competitors as they would need to establish a similar network, or lease space on other satellites, which would take a lot of time to establish (and cost a lot). Consequently Inmarsat and its major competitors, Globalstar, Iridium and Thurya, have a big foothold in the market which makes it difficult for newcomers to dislodge them.
When comparing 2009 with 2008 you should bear in mind that Inmarsat’s 2008 after-tax earnings received a massive boost thanks to a deferred tax rebate which meant that the company ended up with a net tax receipt of $161.6 million. To get a clearer picture of the underlying business for 2009, it’s better to look at the adjusted diluted eps which increased from 39c from 32c
Inmarsat’s results for the first half of 2010 were released on 6 August and these were excellent, with sales up by 12% whilst diluted earnings per share rose by 41% and the interim dividend was increased by 10% to 14c.
Inmarsat’s shares performed well in the first half of 2010, rising from 700p in January to over 820p in July but they have fallen back with the rest of the market to the current price of about 670p, which is roughly where they stood last December.
The prospects
To keep its network up-to-date Inmarsat has to regularly launch new satellites to replace its older models. Its three earliest satellites, the Inmarsat-2 series, are expected to cease operating within the next two years, but Inmarsat is planning three more launches to complement its most recent satellite, Inmarsat-4 F3, which came into service in 2009.
A dilemma for investors is that Inmarsat’s shares have never been cheap. The historic P/E ratio (diluted eps) of 31 tells us that the stock market expects to see a substantial improvement in profits over the next few years (merely adequate results will not be enough for the market).
However the demand for satellite telecommunications should continue increase as the world becomes ever more interconnected, which means that Inmarsat’s profits are likely to grow substantially in the next few years. Consequently some investors are perfectly happy to pay up for what looks to be a very full share price and no doubt deters many others.
www.fool.co.uk
L-3 GCS Awarded $170 Million Contract from U.S. Special Operations Command
L-3 Communications announced that its GCS subsidiary (L-3 GCS) has been awarded a contract by the U.S. Special Operations Command (USSOCOM) for its Panther(TM) Very Small Aperture Terminal (VSAT) manpack satellite communications systems and associated equipment. The systems will be used in support of USSOCOM’s Special Operations Forces Deployable Node-Lite (SDN-Lite) program, which will provide worldwide satellite communications connectivity to Special Operations Forces field personnel. The contract is valued at up to $170 million over the next five years.
“L-3 GCS is particularly honored to have been selected by USSOCOM for this important program to augment warfighter communications,” said Bob Jacobson, president of L-3 GCS. “For the past two years, our goal has been to bring the size of a VSAT terminal down to a rucksack-sized package. We have achieved that goal, and USSOCOM has validated our vision with this award. Now, a single warfighter can have a megabit-per-second, beyond line-of-sight radio in his or her rucksack.”
L-3 GCS will begin shipping MIL-tested and certified Ku-, Ka-, and X-band manpacks, data kits and power systems to USSOCOM this calendar year, with additional units scheduled for production and delivery over the life of the contract.
Located in Victor, N.Y., L-3 GCS is a leading provider of satellite communications (SATCOM) systems that integrate data, broadband Internet, telephony, multimedia, audio, video and computer networking. These rugged, easily deployed systems are utilized by the Department of Defense and Department of Homeland Security as well as other federal agencies and various commercial sector customers. To learn more about L-3 GCS, please visit the company’s website at www.L-3com.com/gcs.
Headquartered in New York City, L-3 Communications employs approximately 67,000 people worldwide and is a prime contractor in C(3)ISR (Command, Control, Communications, Intelligence, Surveillance and Reconnaissance) systems, aircraft modernization and maintenance, and government services. L-3 is also a leading provider of a broad range of electronic systems used on military and commercial platforms. The company reported 2009 sales of $15.6 billion.