During an earnings call, Howard Lance, Maxar’s CEO, stated that the primary path in regard to SSL is to sell that business or, at a minimum, to unload the valuable Palo Alto properties where SSL conducts their operations. That property value is estimated to be approximately $150 million. Lance said that a number of prospective buyers are already in discussions to acquire SSL.
With overall combined earnings for Maxar’s Space Division down 12 percent for the three months that closed on September 30, a $263 million revenue degeneracy has been experienced.Maxar’s year-over-year (y-o-y) revenues declined 10 percent to $886 million when compared to the firm’s financials for the first nine months of 2017 — the GEO satellite business is seen as a significant financial encumbrance, resulting in negative profit margins for the parent company’s overall revenue picture, according to Lance.
Some stated reasons for SSL’s financial slump — the company is down 31 percent in revenues y-o-y — is that components for the firm’s GEO satellites have been found to be highly problematic, with defective parts from an unnamed supplier having to be replaced and reintroduced into production cycles, thereby increasing costs and pulling profits down. Satellite completion times have increased and, as revenues have fallen, so has the workforce at SSL, with the necessary layoffs additionally impacting overall company productivity and delaying manufacturing activities.
According to Lance, this year Maxar would have experienced a less dramatic 1 percent decline in earnings if SSL’s GEO business had not been impacting the combined revenue streams. The Spacecom cancellation of the Amos-8 satellite contract with SSL was an additional concern for Maxar, leaving SSL with but a single order for the remainder of 2018, that being for Japanese operator BSAT.
The Maxar CEO added that Maxar’s Space Systems business is quite “solid” if GEO satellites are not part of the corporation’s revenue mix. With NASA showing great interest in smallsat development, the agency selected Maxar as one of three firms to engage in such work, receiving a contract that is estimated to be worth $750 million. Another opportunity for Maxar rests with the $3 billion estimated value of a Telesat constellation contract and has teamed with Thales Alenia Space as the companies compete against Airbus to develop a complete plan for such a project. A decision on the final contract is expected to be announced in 2019. The Telesat constellation will comprise 300 satellites when fully executed, with the initial contract either for the entire constellation or a few initial smallsats.
There will be only six to seven large GEO satellites being manufactured this year, in Lance’s opinion. Although that is similar to last year’s production of GEO satellites across the globe, that in itself was down from the 20 to 25 satellites that were ordered annually from manufacturers in previous years. As he stated, “This is really unprecedented. We are managing as best we can.”