Lanham-based Final Analysis Inc. is teaming up with General Dynamics Corp. on a $350 million space project that promises to trigger a financial star wars in the multibillion-dollar global satellite industry.
Final Analysis will be the third American company to offer data transmitted through satellites at low orbit when it launches 32 satellites in 2001. The other companies using the low-flying satellites are Washington-based Iridium LLC, which offers telephone and paging services, and Dulles-based Orbcomm.
Final Analysis says its new system will help customers track everything from mailed packages and residential utility usage to the depletion of snacks in vending machines across the country through a small, chip-like device attached to a meter or a vehicle. The satellite cluster also will allow e-mail and pager messaging in the Earth's most remote locations.
"I personally am devoted to peaceful uses of outer space," said Nader Modanlo, the 39-year-old president and founder of Final Analysis. Modanlo was born in Iran and worked as an engineer and project manager for National Aeronautics and Space Administration subcontractors during the Cold War. He said global communications is not only good business but also good civics.
Traditional commercial satellites are expensive, high-orbit satellites that cover a fixed range and aren't capable of processing the data, such as broadcast frequencies, that they transmit. The new, low-orbit satellite technology can cover a broader range and can collect, monitor, store and selectively transmit data, which makes it easier for its users to manage and process information.
In a $75 million contract and equity arrangement announced last week, a Minnesota subsidiary of Falls Church-based General Dynamics will handle the engineering and networking of Final Analysis's satellites and ground operating system. Final Analysis will be the prime contractor and will operate the system.
"It's a huge endorsement and a validation for Final Analysis" to get a substantial investor such as General Dynamics, said William Pitkin, an analyst for New York investment firm Merrill Lynch & Co.
Final Analysis's major competition comes from Orbcomm, which has similar satellites and is starting to gain a customer base. In November, Orbcomm, which is jointly owned by Orbital Sciences Corp., of Dulles, and Teleglobe Inc., of Canada, launched 28 such satellites, which hover about 1,000 kilometers above Earth.
Orbcomm has installed 10 percent of the 116,000 tape cassette-size communicators it has sold to trucking firms, utilities and heavy equipment companies. Via satellite, these customized transmitters can take inventory, measure gas levels and monitor the location and well-being of moving vehicles.
The market for data systems--including satellite and ground-based transmitters--will be about $2 billion next year and will grow to $5 billion by 2002, said Riyad Said, an analyst with Friedman, Billings, Ramsey & Co. Inc., an investment firm in Arlington. The advantage of the satellite systems is that they can serve internationally at a lower cost than ground-based alternatives, he said.
Final Analysis hopes to capture as much as 20 percent of the market and will go public in two or three years, Modanlo said. Orbcomm plans to capture 10 percent to 15 percent by about 2003 and go public within a year, said Barry Beneski, a spokesman for Orbital.
Iridium, which filed for protection from its creditors in Bankruptcy Court last month, offers mobile telephone and pager service, which uses much heavier, more expensive satellites. Analysts say that though the satellite technology is similar to that of Final Analysis and Orbcomm, the market is different from the one those companies serve. "The technology is perfect," but Iridium did a bad job of marketing the product, Pitkin said.
Modanlo said that Final Analysis's technology is seven to 10 years ahead of Orbcomm's and that its data transmission power is 60 times as powerful. That means customers will see the price of asset tracking decrease by a factor of 10, he said.
But Wende Cover, director of marketing and communications for Orbcomm, remains skeptical about those projections. "We really haven't seen what their cost is going to be, because they are still on paper" and not operational, she said.
In the next couple of months, Final Analysis, which employs 25 people locally and 25 more worldwide, will announce contracts for its power subsystem, radio communication system and marketing and distribution, Modanlo said. The company has joined with aerospace firm PO Polyot in Russia to launch the satellites.
John Bensche, a satellite services analyst at Lehman Brothers Inc. in New York, said the technical advantages Final Analysis has over Orbcomm are subtle. Final Analysis's satellites can adjust to frequencies in China, which doesn't use the international standard frequency, he said. The satellites can handle more data and process it faster, which may be useful when large data files are being transferred, he said.
Beneski said Orbcomm's advantage is that "we are able to control a great deal of the process from the ground up." Being first to market was a great advantage, allowing Orbcomm to "pick off great clients," such as top trucking companies Schneider National Inc. and J.B. Hunt Transportation Services Inc., and other contracts with Caterpillar Industrial Products Inc., a few years ahead of competitors, he said.
Final Analysis Inc.
* Headquarters in Lanham.
* Closely held company founded in 1992.
* Employees: 25 local, 25 worldwide.
* Launched two test satellites, one in 1995 and one in 1997.
* Last year's revenue was almost $10 million.
* Plans to finance $350 million satellite project through $50 million in equity partnerships, including General Dynamics Corp., and $150 million in high-yield bond sales this year. Plans to go public by 2002.
* Headquarters in Dulles.
* Privately held company founded in 1990 by parent companies Orbital Sciences Corp., of Dulles, and Teleglobe Inc., of Canada.
* Employees: 460 local.
* Launched 28 satellites by last November and plans to launch seven more this year, with more on the way.
* Revenue not disclosed.
* Currently financed by parent companies. Plans to go public within a year.
CAPTION: Final Analysis President Nader Modanlo, who worked for NASA subcontractors during the Cold War, said his company hopes to capture as much as 20 percent of the market.
CAPTION: Richard Kavanagh, satellite operations manager, works in the control room at Final Analysis Inc.'s headquarters in Lanham.