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Satellite Likely To Send ViaSat’s Sales Soaring

VIASAT INC.

CEO: Mark Dankberg.

Revenue: $802 million in FY 2011; $688 million in FY 2010.

Net income: $36 million in FY 2011; $31 million in FY 2010.

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No. of local employees: 1,200.

Headquarters: Carlsbad.

Year founded: 1986.

Stock symbol and exchange: VSAT on Nasdaq.

Company description: Provider of satellite equipment and services to government and military customers, and provider of broadband Internet services mainly to rural consumers.

Key factors for success: Attracting the best possible talent and recognizing employees based on their contributions; conservative financial management; and anticipating market trends.

Although ViaSat Inc. had to delay the launch of its broadband satellite by a month, once the machine begins orbiting, the results should be worth the wait, said several analysts who cover the telecom equipment maker.

“If it works as advertised, and there’s no reason to believe it won’t, this will be a relatively cheap delivery of broadband in the sky,” said Tim Quillin, a stock analyst with Stephens Inc. “If they build it, subscribers will come.”

ViaSat said July 20 it had to postpone the launch of its ViaSat-1 satellite until late September after problems occurred with another satellite launched in May that uses the same basic chassis. Because some solar arrays on the earlier launched satellite didn’t deploy correctly, Space Systems/Loral, the manufacturer of the satellites, conducted an extensive review of all of its operations, requiring weeks of additional inspections and checking.

Once those checks were completed, the company had to get back in a line for a launch that will take place in Kazakhstan sometime in the last week of September, said ViaSat spokesman Bruce Rowe. It’s the second time the launch had to be postponed.

The $400 million satellite is part of a major shift in strategy for ViaSat, the Carlsbad-based public company that has historically depended on government and defense contracting for the bulk of its revenue.

Starting in 2008, the company began laying the groundwork to increase its commercial sector sales of its manufactured satellite equipment by moving into the retail delivery arena of broadband Internet services. The following year, ViaSat completed a $568 million acquisition of WildBlue Communications Inc., a Denver-based Internet service provider to rural parts of the nation.

Heavily Invested in Business Segment

When adding the cost of the satellite, the launch, the insurance and additional infrastructure build-out, ViaSat’s total investment into its broadband ISP business is about $1 billion, Rowe said.

The strategy doesn’t come without some risks, but the risks are mitigated by the fact that WildBlue is a proven entity that has a good reputation in the industry.

“They know what they’re doing,” he said of the ViaSat subsidiary. “It’s not that big a leap for us. If we were building a whole new service organization from scratch, that would be tough, but because we bought WildBlue that sets us up pretty well.”

While revenue generated from increased WildBlue business may be delayed due to the postponed launch, most analysts covering the company said dramatically enhanced higher capacity and faster downloading speeds from ViaSat-1 should increase subscriber additions by 20,000 monthly.

“We believe VSAT can start adding satellite consumer broadband subscribers as fast as the same 30,000/month rate it attained in 2005, and again in 2007 once ViaSat-1 comes on line, though our published model equates closer to an initial 20,000/month ramp expectation,” said Mike Crawford, an analyst with B. Riley & Co.

Rowe said CEO Mark Dankberg forecast revenue from WildBlue could double once the satellite starts providing service. The business that now counts about 400,000 subscribers could quickly get to about 1 million in the next two to three years, Rowe said, from a potential new subscriber population of about 20 million.

Crawford estimated ViaSat revenue for the current fiscal year that ends March 31, 2012, at $910 million, up from the 2011 fiscal year revenue of $802 million, and 2010’s revenue of $688 million. Crawford rates the stock, traded under VSAT on Nasdaq, as a buy, and estimated a price target by the end of this calendar year at $50. As of July 25, shares were at $45.35, giving the company a market capitalization of $1.9 billion. Shares have ranged from $32.96 to $46.08 during the past 52 weeks.

The increased and potential new business from broadband subscribers has resulted in WildBlue adding jobs to its existing payroll of 275.

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