Monday, July 26, 2010

A Look at the Eye in the Sky

By Eric Jackson
RealMoney Contributor

7/26/2010 5:06 PM EDT
Click here for more stories by Eric Jackson

Have you taken a look at some geospatial imagery stocks lately? Probably not, but you should. You have probably seen these companies' end products on Google (GOOG - commentary - Trade Now) maps.

The two leading public companies in this space are GeoEye (GEOY - commentary - Trade Now) and DigitalGlobe (DGI - commentary -Trade Now). They both got their start working closely with the U.S. military as private companies. They launched their own satellites into space to take images of Earth. Their initial customers were the U.S. government - specifically the National Geospatial-Intelligence Agency (NGA). Of course, this agency is tasked with keeping tabs on all the "evildoers" out there who might inflict harm on U.S. interests.

This agency and the rest of the U.S. government have had an interest in seeing both of these companies develop and strengthen over the last few years. To support them, they've provided their largest customer orders over the greatest period of time and given them the support needed to raise financing to build and launch their newest satellites.

The industry (at least in the U.S.) basically operates as a duopoly for GeoEye, which is based near Washington, D.C., and DigitalGlobe, which is based in Colorado. The two companies play leapfrog in terms of which one has the latest and greatest satellite in the sky, taking images.

The quality of the imagery keeps getting better in terms of color, resolution and how small a space they can capture. They're now at the point where they can capture an image of home plate on a baseball diamond, so they are extremely powerful.

Because of this, GeoEye and DigitalGlobe have found eager buyers of their imagery from the Web portals Google, Microsoft (MSFT -commentary - Trade Now) and Yahoo! (YHOO- commentary - Trade Now). These geospatial companies produced striking images of the recent Iceland volcano ash, the Iranian protests last year and President Obama's inauguration 18 months ago.

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