Activist: Why Google Cares About GeoEye

For example, with high-resolution images from a satellite that circles the earth several times a day, it becomes possible to integrate real-time traffic information when plotting traffic directions. It also becomes possible to easily track GPS-equipped vehicles.

GeoEye also has significant mapping tools that can be used to analyze multiple or time-series images, an interesting feature that could be interesting for Google Earth and Google Maps to implement.

If the connection between Google and GeoEye came down to merely improving Google Maps, you might have expected a Google product manager to attend last week's launch, not the co-founders. The fact is that Brin and Page have a personal interest in space. From investing early in Google Earth to last year's news that Brin signed up to take a personal space flight in 2011.

While some Google critics have poked fun at the company's interest in space, you cannot watch a news broadcast now without seeing some wide-angle image of a country that zooms into the city or location of interest to the story courtesy of Google Earth. There is also a long-term secular trend that we want to know exactly what's happening now in any place globally. The most accurate and up-to-date images of earth are part of that trend, and GeoEye-1 falls in the sweet spot of that demand. Google intends to take advantage of that (to say nothing of the government's continued interest in this information).

Put all of this together and you need to attach a premium to GeoEye's shares as a potential takeover target by Google beyond the price target I mentioned earlier. GeoEye is currently putting together plans to build GeoEye-2, its next-generation satellite for launch in 2011. Google just might want to have that satellite exclusively for its own use. If so, Internet giant would likely want to purchase the company in the next six months, before others agree to funding terms with GeoEye to develop that satellite.

Keep your eyes on the sky for a fast-rising GeoEye stock price.