Activist: Why Google Cares About GeoEye

GeoEye (GEOY Quote) is a relatively small company that takes pictures of the Earth from three satellites it operates in space. You've probably never heard of it. However, Google (GOOG Quote) co-founders Sergey Brin and Larry Page have. In fact, both attended last Saturday's launch of GeoEye's newest satellite at Vandenberg Air Force Base in California. In fact, Google's logo was on the side of the rocket that launched the satellite into space.

Why were they there, and what does it mean for Google and GeoEye investors?

I wrote about GeoEye earlier this year and have a large long position in the company. While the company has had issues largely of management's own making (delays in the launch of the satellite, minor earnings restatement and poor communication with investors), it has now overcome all of these with the near-textbook launch of the GeoEye-1 satellite last week.

GeoEye operates in a duopoly in the U.S. with DigitalGlobe, a smaller, private and less well-capitalized competitor. Both companies take geospatial images of Earth and sell those to governments and commercial customers. Until the last six months -- when GeoEye gave up some market share to DigitalGlobe, which launched its newest satellite in the sky last fall -- GeoEye was a $200-million-a-year company with 45% operating margins. It will now quickly return to that size and much more in the next year.

GeoEye-1, the satellite launched last weekend, is a game-changer for the industry. It's the first satellite to take color images of earth with the highest resolution. If you want to snap some images of a baseball plate at your local park, GeoEye-1 is up to the task. DigitalGlobe, assuming it goes public in the next year, will not leapfrog GeoEye with a better satellite for at least two years.