Monday, March 02, 2015

Will the Last MDA Employee Leaving the Country, Please Turn out the Lights

          By Brian Orlotti

MDA CEO Dan Friedmann. Photo c/o MDA.
While Richmond BC based MacDonald Dettwiler (MDA) is benefiting from a "surging" international demand for Earth observation satellites and data, none of that business is coming from Canada and the company is currently transferring resources out of the country to follow the market.

At least that's the story coming out of the February 25th, 2015 fourth quarter conference call, a transcript of which is available online as part of the February 26th, 2016 Seeking Alpha article, "MacDonald Dettwiler and Associates' (MDDWF) CEO Dan Friedmann on Q4 2014 Results - Earnings Call Transcript."

As outlined in the transcript, with the Canadian government's lack of interest in new space related-projects, it seems obvious that Canada’s leading space firm, one of the "Three Kings" of the Canadian space industry, has in effect lost its home market.

A large source of the increased demand for earth observation data, according to MDA CEO Daniel E. Friedmann, is the US government. After a period of reduced spending in 2014 due to US budget sequestration, 2015 has seen renewed US government spending in intelligence-related earth observation.

Overview of MDA SS/L facilities in Palo Alto, CA. Power point slide from the June 27th, 2012 MDA conference call on the acquisition.

As outlined in the June 27th, 2012 post, "MacDonald Dettwiler buys Space Systems Loral for $875M," MDA was initially able to become a supplier for US satellite contracts through its 2012 purchase of Palo Alto, CA based Space Systems Loral (SSL), which provided the firm with a US based manufacturing facility, as required under US law.

Subsequent US purchases have followed, the most recent being the October 2014 $40Mln US ($50.15Mln CDN) cash purchase of General Dynamics Advanced Systems, as outlined in the October 5th, 2014 IHS Janes 360 article, "MDA completes purchase of Advanced Systems business from General Dynamics."

Beyond the US, MDA is pursuing a strategy of joint ventures rather than acquisitions. Currently in the works are joint ventures in Brazil, India and Turkey. In Brazil, MDA is preparing to bid on a coastal-surveillance project. In parallel with its Indian joint venture, MDA is also preparing to bid on a contract for an Indian geostationary orbit telecom satellite. In Turkey, MDA has  won a joint contract with Aselsan Electronics Industries to provide a Ku-band payload for the Turksat 6A telecom satellite.

The Special Purpose Dexterous Manipulator (DEXTRE), a two-armed robot manufactured by MDA for use with the International Space Station's Canadarm2 robotic arm in Brampton, Ontario in 2007. As outlined in the March 7th, 2013 Bloomberg article, " MacDonald Dettwiler Launches to Orbit on Satellite Boom," the SSL purchase was always considered "critical" to MDA’s growth. Photographer: Norm Betts/Bloomberg.

Friedmann also stated that MDA believes that contracts for several massive low-Earth-orbit commsats will soon be within reach. SpaceX and Google, OneWeb, the Virgin Group and others have laid out plans for constellations of hundreds, even thousands, of satellites.

All of this contrasts with MDA's shrinking Canadian business, which once totaled over $200Mln CDN per year, but now stands at only half that.

Most telling of all was Friedmann's comment on Canada’s traditional power base of space robotics and satellites:
This is in the process of disappearing...Basically, we have lost our indigenous customer.
Brian Orlotti.
Only time will tell whether other firms can step in and find their own place, independent of government support, in Canada's space sector.

Brian Orlotti is a network operations centre analyst at Shomi, a Canadian provider of on-demand internet streaming media and a regular contributor to the Commercial Space blog.

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