DigitalGlobe Shares Plunged: What You Need to Know
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of satellite-imagery specialist DigitalGlobe (NYS: DGI) were falling out of orbit today as investors bid them down as much as 10% in intraday trading.
So what: According to reports from Bloomberg, members of the U.S. Senate Intelligence Committee sent a letter to the White House urging the administration to protect the public-private defense program that works with DigitalGlobe and GeoEye (NAS: GEOY) . The combined program is more than $7 billion, including a $3.8 billion contract with GeoEye and $3.55 billion with DigitalGlobe. As the government looks at cutting back its budget, the Defense Department is considering "major" cuts that could affect the EnhancedView program. The size of the potential cuts was not disclosed.
Now what: Times can get a little stressful when the government is one of your major customers and it's trying to tighten its budget. When GeoEye announced earnings back in early November, both its shares and the shares of DigitalGlobe tanked on concerns over slowing business from governments -- both in the U.S. and around the world.
The issues surrounding the EnhancedView program will be something for investors to watch closely. While DigitalGlobe and GeoEye both have significant customers in the private sector, a hefty cut in what the government is spending with them would be particularly painful for the companies and the stocks.
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