DigitalGlobe IPO Could Be Boon for GeoEye

GeoEye(GEOY Quote), the geospatial imagery company that sells images to corporate and government customers taken from its satellites, has received extra attention this past week because primary competitor DigitalGlobe (which will hold the ticker DGI) is holding a rare IPO on Thursday.

This situation could be similar to what happened when Visa(V Quote) went public after MasterCard(MA Quote) -- DigitalGlobe's IPO should bring a big boost to GeoEye's valuation.

In the two months leading up to Visa's IPO last spring, MasterCard's stock price increased 26%. Following the IPO, MasterCard kept chugging, rising 24% over the two months post-IPO, which was better than Visa's 18.6% growth over the same period.

DigitalGlobe and GeoEye essentially operate a duopoly in the United States. Although they both compete fiercely for new business, they share a number of the same customers such as the National Geospatial-Intelligence Agency (NGA).

They have expertise in launching and deploying specialized satellites that can take pictures of a home plate from space -- in color. That's helpful for mapping, planning and, of course, national security.

There are very high barriers to entry in this business and it's not well known that the NGA funds the development and launch of these two companies' satellites. Their largest single customer has a built-in incentive to buy images from both.

Until Thursday's IPO, GeoEye has been the only public company in this duopoly, so the comparisons to judge valuation have been not ideal. Being a smaller-cap company also has led many to pass over GeoEye in the last year, especially as delays occurred around the launching of its latest satellite last fall and NGA giving the thumbs-up to the quality of the images coming from the new satellite (which was finally launched in March).