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Thales Continues European Penetration of U.S. Defense Market

The U.S. Department of Defense awarded a contract to Thales Alenia Space to build the next generation of Irridium Low Earth Orbit (LEO) communications satellite. The contractor team is led by the French military electronics company but includes an Italian company as well as U.S. aerospace company Boeing (BA). The total value of this contract could be worth over $2.1 billion.

The Irridium concept was to establish a fleet of satellites that would use special handsets and relay communications around the globe. The commercial market for this company did not materialize and its biggest customer remains the U.S. military. The contract will develop and build the next set of satellites to replace the original set. The contract may also add several hundred million to launch the satellites and upgrade ground stations.

The original competitors for this contact included Loral Space & Communications (LORL) and Lockheed Martin (LMT). Loral dropped out early over concerns that it could not make money on the deal due to price pressures. Lockheed as the U.S. competitor would have seemed to be favored but it seems that the Thales team offered the best price.

Over the last twenty years or more as the U.S. industrial base has declined more-and-more U.S. business as gone to the big European defense contractors. This, though, is one of the first major space related contracts to do so. The U.S. Defense Department has been restructuring their military space programs due to some cost and schedule problems with the various new weather and communication satellites. This win demonstrates that the U.S. military is willing to look past their traditional suppliers especially when cost is a concern.

Photo from NASA Goddard Photo and Video flickr photstream.

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