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Defense Funds Boost Orbital's Fortunes

By Bill Brubaker
Washington Post Staff Writer
Thursday, March 10, 2005; Page LZ01

It's a tough line of work, making rockets and satellites for customers as demanding as the U.S. Department of Defense. When a launch is successful, there are smiles all around. When it's not, there's no hiding the disappointment.

Orbital Sciences Corp. knows the bitter and the sweet.

Orbital saw its Galaxy XIV satellite successfully launched in 2004. The 23-year-old company employs about 2,700 people. (Courtesy Of Orbital Sciences Corp.)

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In December, the Dulles-based company was largely responsible for an aborted U.S. missile-defense test in the central Pacific Ocean. Making matters worse for the Missile Defense Agency, the same mission -- to test the ability of an interceptor missile to destroy another missile carrying a mock warhead -- was halted again in February for problems unrelated to Orbital Sciences.

But the recent failure, which brought a measure of unwelcome attention to Orbital Sciences, doesn't reflect the financial success the company has enjoyed over the past year.

Last week, the 23-year-old firm, which also has operations in Prince George's and Howard counties and in Arizona, California, Alabama and Indiana, reported a profit of $200 million on revenue of $675.9 million in 2004, compared with earnings of $20.2 million on revenue of $581.5 million a year earlier.

This success has meant more jobs at Orbital, which employs about 2,700 full-time, part-time and contract workers, a gain of 350 over the past year.

All told, Orbital has about 1,200 workers at its Dulles headquarters, 150 at its space-related technical services division in Greenbelt and 100 at a facility in Columbia where the company produces wireless communications systems for mass transit operations.

Since moving to Dulles in the early 1990s, Orbital has become one of Loudoun's largest private employers. And Orbital officials predict that the Dulles workforce, spread out in five buildings that total almost 600,000 square feet, should grow again this year. That's welcome news to county officials who have seen such large employers as Dulles-based America Online Inc. and Ashburn-based MCI Inc. trim payrolls in recent years.

Orbital's fortunes have been bolstered by increased government spending on defense and intelligence, Wall Street analysts say. Orbital makes small space and rocket systems for military, intelligence and commercial users.

Although Orbital trumpets much of its work in news releases, the company said in an annual report filed last week with the Securities and Exchange Commission that a portion of its business is "classified for national security purposes by the U.S. government and cannot be specifically described."

In 2004, about 80 percent of Orbital's business came from government-related contracts, up from 67 percent in 2003 and 58 percent in 2002, according to the filing. In addition to the Department of Defense, Orbital's top customers include NASA and Boeing Co., another large government contractor.

"As has been the case now for the last three or four years, the budgets for military intelligence and satellite programs continue to grow at robust rates," David W. Thompson, Orbital's chairman and chief executive, said in a recent conference call with analysts. "This is likely to drive significant new order opportunities and revenue increases for us in these market areas."

Thompson said that in 2004, his company carried out 11 successful space missions and delivered 20 rockets and satellites for future launches. This year, he said, Orbital expects to carry out more than 30 space missions and deliver 12 to 14 satellites and launch vehicles for future missions.

Orbital has played a large role in the government's missile defense program, which has been the subject of heated debate in Congress. Proponents say the program could help the United States defend against an attack from an adversary such as North Korea. Opponents say the program is costly and unreliable.

At a recent presentation for investors and analysts at the Mandarin Oriental Hotel in the District, Thompson downplayed the impact of the aborted missile defense tests in December and February.

"It's not a good thing when that happens, but I think the program will bounce back pretty fast," he said. "We should be able to repeat that test, hopefully with complete success, sometime [in April]. . . . I think a lot of these little glitches that we have seen will be put to rest pretty quickly."

Patrick J. McCarthy, a senior vice president of the investment firm Friedman, Billings, Ramsey Group Inc., said missile defense is "probably the most important piece" of Orbital's business.

In a research report last week, he called Orbital a "compelling investment opportunity" for those who can afford to hold the stock for 12 to 18 months.

But McCarthy also offered a word of caution.

"Orbital generates a significant portion of its revenue from missile defense programs," he wrote. "Although missile defense is a top priority of the Bush administration, it is a frequent target of congressional Democrats for potential spending cuts."

Government records show that Thompson was a contributor to the Republican National Committee and the Bush-Cheney reelection campaign last year.

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