When bigger isn't better

By G.F.

AT FIRST glance, DigitalGlobe, an American satellite-imagery firm, paints an upbeat picture for investors. In its most recent quarterly earnings, released last week, the company met analysts' predictions, producing only a very slim loss of around $100,000. It seems to have good prospects for the future too. It has already secured $600m in contracts for the next 12 months, equal to around 30% of the global market for satellite imagery. And in October it activated its newest satellite, which can produce the highest definition images produced by any similar service currently available.

However, on closer inspection, the firm is not quite as healthy as it may first appear. Just under four-fifths of its revenues in the next year will come from the American government—and most of that from a single organisation, the National Geospatial-Intelligence Agency. Because those contracts are subject to annual renewals, the firm's future sales are therefore more uncertain than they may first appear. Partly as the result of this over-reliance on one customer, DigitalGlobe's share price has fallen by 35% since January.