[Satellite News 09-06-10] Not even half a year ago, Canadian satellite company Com Dev International was projecting 10 percent revenue growth by the end of 2010. By June, the company downgraded its forecast to “minimal growth,” blaming the U.S. dollar’s weakness against the Canadian dollar and continued cost growth on fixed-price contracts for government customers in the United States and Canada as culprits.
    Today, the company has reevaluated its end-year position to expect a five percent revenue drop and has dismissed CEO John Keating after a dramatic business decline over the spring and summer of this year.
    Analysts, who had initially projected the Ontario-based satellite company to report a profit in the third quarter are still scratching their heads as to why Com Dev reported $52 million in revenue with a $1.7 million net loss when the company was expected to generate $61.8 million in revenue with $3.5 million of net income.
    “Little color was given to support the revenue shortfall, which is a surprise since management just last quarter lowered revenue expectations for the year," said National Bank Financial analyst Kris Thompson.
    In late August, Keating said the company was been grappling with rising costs of five satellite programs, including one program run by its subsidiary Com Dev USA, where engineers were given inaccurate engineering designs by the program’s predecessor.
    Another program that saw rising costs was Com Dev’s component work on the NASA James Webb Space Telescope. Although Keating said the company still expected that program to be profitable, the combination of these miscalculations have cost Com Dev its chances to meet previous targets. “Collectively, those programs are 86 per cent complete and are expected to represent a steadily decreasing proportion of our revenues, falling from five per cent of Q3 2010 revenues to less than two per cent of revenues by the second half of next year," Keating said.
    Com Dev will maintain its investments in its Com Dev USA and ExactEarth subsidiaries, despite short-term revenues being impacted by delays in the launch of two small satellites for ExactEarth, which is developing a global maritime identification system for ships operated by coastal authorities.
    ExactEarth’s AIS payload on ISRO’s Resourcesat 2 Earth observation satellite aboard India’s Polar Satellite Launch Vehicle rocket has been delayed until November. The other spacecraft is the Surrey Satellite Technology-built ADS-1B satellite, which will not be launched until February due to limited availability of the Russian Soyuz rocket.
    While Keating tried to remain optimistic, pointing to initiatives to leverage its existing resources and support the company’s commercial products division, which was generates more than 60 percent of revenues, it was not enough for Com Dev board members to remain confident in his leadership.
    Keating was dismissed, effective immediately, after Com Dev’s board voted unanimously to replace its executive leadership. Chairman Terry Reidel said the company had suffered from poor program management and appointed COO Mike Pley interim CEO while the company searches for a permanent replacement.
    “[Com Dev’s] recent performance is unsatisfactory, and the CEO is ultimately accountable. We share investors’ concerns about our performance, and we want a renewed focus on profitability. We continue to be committed to our U.S. initiative and the exactEarth business. But I reiterate: In today’s economy, profitability should be viewed first,” Reidel said in a statement.
    The company will take a severance charge of about $2.8 million in the fourth-quarter for Keating’s contract.
To turn its fortunes around, Com Dev announced it will start cutting its resources across the board. The company plans to lay off 5 percent of its work force and drop some of its product lines. Com Dev officials say the company is now focused on completing the NASA James Webb Space Telescope program and finding a substitute for the revenue it generated for the company.