Monday, November 02, 2015

MDA CEO Dan Friedmann Didn't Threaten to Leave Canada Last Week!

          By Chuck Black

Once, it seemed like the quarterly MacDonald Dettwiler (MDA) investor conference calls simply weren't complete without one or two threats from MDA CEO Daniel E. Friedmann to move his company facilities out of Canada and into a country which promised to purchase more MDA products.

MDA CEO Friedmann. Photo c/o MDA.
Not any more.

These days, Friedmann is waxing positively poetic over the incoming Justin Trudeau Liberal government.

The October 29th, 2015 Seeking Alpha post, "MacDonald Dettwiler and Associates' (MDDWF) CEO Dan Friedmann on Q3 2015 Results - Earnings Call Transcript," which included a transcript of the latest October 28th, 2015 MDA Q3 earnings conference call, even quoted Friedmann as stating that:
All I can tell you is that in the run up to the election, the Liberals made positive statements with both respect to space and the defense part that we're interested in, because they spoke about a renewed focus on surveillance and control of the Canadian territory, in particular the Arctic which is what our two biggest space programs (the winding down RADARSAT Constellation mission and the upcoming, but so far unfunded Polar Communication and Weather mission) are centered on. 
They also spoke about developing a long-term strategy and so on. So they're the ones that were focused on that and I think we can remember that the last time the Liberals were in power, they were incredibly supportive of space and international partnerships and science and the country's space industry and MDA had a very, very thriving existence at that time in Canada. 
But that's just what's been said so far and what happened in the past. I have no basis to be able to tell you whether things are going to revive in 2016 or not. 
It is an emergency situation. I think the government is aware of that because a lot of work is winding down and capabilities being lost. So I think they're aware of the issues, but I don't know how they rank with respect to everything else they have to do.
All of which sounds highly positive, especially when compared with some of his other recent comments from previous quarterly conference calls, such as those outlined in the May 12th, 2015 post, "MacDonald Dettwiler, Sherlock Holmes and Why "Daddy" Might not Love Either."

However, as outlined in the October 29th, 2015 Space News article, "MDA Hoping to Ramp Up OneWeb Work in 2016," MDA isn't totally depending on the good graces of the incoming Liberals to shore up its Canadian base.

According to the article, MDA has also secured an unspecified contract with NewSpace start-up OneWeb Ltd. to develop satellite payload components for a constellation of approximately 900 proposed low orbiting satellites intended to provide global internet delivery to rural areas. Work is expected to take place in MDA's Montreal facilities, beginning in 2016. The Montreal facility is currently working on RADARSAT Constellation.

Of course, there are always caveats. According to the article, MDA's "new status as a member of the OneWeb Ltd. team – presumably in return for an equity investment that MDA has not disclosed – to date has resulted in no contracts for OneWeb’s 900 satellites."

I wouldn’t characterize it as a contract,” Friedmann said of MDA’s OneWeb work. “We are working, we are getting paid but we don’t have a fixed-price contract. We’re just a member of the team. The program is proceeding toward defining what it is going to look like and still has to raise a couple of billion dollars, which we’re trying to help with."

The article also covered other MDA sales opportunities, the financing troubles its been having at its Space Systems Loral (SSL) subsidiary given the temporary closure of the Export-Import Bank of the United States (Ex-Im), which normally guarantees funding for these sorts of projects (it's considered a short term political problem, at least as outlined by the October 29th, 2015 Air Transport World post "One man is keeping Ex-Im closed") and the assistance provided by Export Development Canada (EDC) in at least one instance, even though none of the funded SSL satellite construction work would occur in Canada.

But it's worth noting that investor support for MDA has reached a plateau over the last few months and the latest conference call hasn't changed that perception. For example, ScotiaBank has scaled back its expectations for MDA stock as outlined in the November 2nd, 2015 Dakota Financial News article "Scotiabank Cuts Macdonald Dettwiler & Associates Price Target to C$88.00 (MDA)" and other financial institutions are likely to soon follow suit.

Either the US Ex-Im needs to reopen or else OneWeb needs to raise a few billion more to fund its satellite constellation or else some other market is going to need to open up for MDA products and services.

Chuck Black.
If none of that happens over the next little while, MDA CEO Friedmann is going to need to start sucking up to the new Liberal government even more so than he did last week.

Yes, indeed! Mr. Prime Minister!

Chuck Black is the editor of the Commercial Space blog.

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