At a recent news conference, a Defense Department intelligence agency announced it had signed a contract, worth as much as $500 million, with Orbimage Inc., a Dulles firm that provides high-resolution satellite images.

A year earlier, the agency had announced a similar $500 million deal with DigitalGlobe Inc., a Colorado company that also serves up satellite images to support the government's domestic and international intelligence missions.

Why the need for two spy satellites -- from two competing companies -- with similar capabilities?

Quite simply, the government needs a ready backup should one of these companies collapse, Jaan A. Loger, a director of the National Geospatial-Intelligence Agency in Bethesda, said at the news conference.

"The business is still young and not necessarily robust," Loger said. "Given that it's a risky business, we want to make sure that at least one survives, to be brutal about it. So we've got a better chance with two, starting off."

Orbimage's 12-year history illustrates just how volatile the spy satellite industry can be. Until last year, the money-losing company had been owned by Dulles-based rocket maker Orbital Sciences Corp. But Orbital Sciences' ownership interest in Orbimage was canceled at the end of last year as part of a Chapter 11 reorganization by the satellite imaging firm.

Orbimage reported losses in the first two quarters of this year. But its stock price soared 71 percent, to $13.50, on the day the $500 million contract was announced.

"The satellite business is a risky business in and of itself," Gary Adkins, Orbimage's vice president of federal and national security programs, said in a recent interview. "If you're thinking about the expense and the investment it takes to accomplish a construction and a launch and getting a satellite in orbit, you know, it's quite risky. Just the general nature of the business itself has risk built into it."

The commercial satellite imaging industry has taken on new importance since the terrorist attacks of Sept. 11, 2001.

In May 2003, the Bush administration announced a policy to use commercial satellite firms "to the maximum practical extent" for tasks related to military, intelligence and other operations.

"Vital national security, foreign policy, economic and civil interests depend on the U.S. ability to remotely observe Earth from space," a White House statement said.

Commercial satellites, the statement added, can "augment and potentially replace existing U.S. government capabilities."

Orbimage called the new government policy a boon to the industry because it "helps to remove uncertainty in the eyes of capital markets as to the extent all government agencies will partner with Orbimage, and our commercial industry, for its imagery and mapping needs," the company's chief executive, Matt O'Connell, said at the time.

There was seemingly good reason for uncertainty about Orbimage.

On July 1, 2001, Orbital Sciences decided that it would not provide any future funding to Orbimage "beyond what was then contemplated," according to a public filing by Orbital Sciences.

Three weeks later, Orbimage signed a deal with the National Aeronautics and Space Administration to monitor the Earth's environment from a satellite known as OrbView-4, which had been manufactured and built by Orbital Sciences.

On Sept. 21 of that year, 10 days after the terrorist attacks, OrbView-4 failed to achieve its intended orbit. The satellite was lost.

Three days later, Orbimage announced plans to file for Chapter 11 bankruptcy protection. The petition was filed in April 2002.

In summer 2003, while still in bankruptcy, Orbimage launched a high-resolution satellite, dubbed OrbView-3. The National Geospatial-Intelligence Agency became one of the satellite's steady customers.

Adkins, Orbimage's vice president, declined to discuss specific images the satellite has provided clients. But he confirmed that OrbView-3 has made images of two countries that have been the focus of large U.S. military operations: Afghanistan and Iraq. The satellite can discern images as small as one meter, he said.

The NGA "can use imagery to select and delineate where the locations of roads and railroads and facilities are," said Adkins, 55, a retired Air Force cartographer who heads Orbimage's government sales.

The agency can also use satellite images to assess "how one might move across different expanses of terrain, whether it be vehicular traffic or troop traffic or what have you," Adkins said. "And you use the data for supporting things like analyzing a coastal zone -- beach analysis which would then support things like amphibious operations."

Orbimage emerged from bankruptcy Dec. 31, 2003. As part of the restructuring, Orbital Sciences' ownership interest in Orbimage was canceled. Orbital reported in its 2003 annual report that its investment in Orbimage had resulted in a $40.6 million loss.

Over the first six months of this year, Orbimage said it lost $12.8 million on revenue of $11.8 million. That's compared with a loss of $5.7 million on revenue of $3 million in the first six months of 2003. The company attributed this year's losses, in part, to increased operating costs related to OrbView-3.

The $500 million deal with the NGA will fund construction of a more sophisticated satellite, OrbView-5. This satellite will discern objects smaller than half a meter, Adkins said.

Orbimage's new satellite is scheduled to be launched in 2007, and DigitalGlobe's in 2006, Loger, the NGA's director, said at the recent news conference.

"We plan to have a long, long relationship with the commercial vendors," he said.

There may be limits, though, to how far the government is willing to go.

Asked whether his agency plans to make deals with any more satellite imaging firms, Loger said: "We think two is about as good as we can afford to do. I can't go up to the Hill and explain [to Congress] why we need three or four."

"The general nature of the business itself has risk built into it," said Gary Adkins, an Orbimage vice president. The spy satellite industry is volatile.