PARIS — When Dario Zamarian left private-equity investment company Blackstone Group to become president of satellite builder SSL in 2017 he thought he would be helping diversify a company away from large, commercial, geostationary-orbit telecommunications satellites.
He knew he arrived at what was then thought to be the latest cyclical downturn in GEO satellite orders, out of which Palo Alto, California-based SSL had made a specialty and its main product.
A year later, SSL’s owner, Maxar Technologies, has concluded that the downturn is not cyclical, but likely a structural change and that it’s time to merge, sell or quit the Palo Alto site to focus on smaller satellites and other projects form a less-expensive facility in South San Jose.
Maxar and SSL have approached several competitors to sound out interest in a merger or sale, with no luck — especially since the company has valued the Palo Alto site’s land alone as worth $150 million to $200 million.
Zamarian did not want to focus on the lights-off option but acknowledged that the company needs to prepare for just that and to explain to its existing customers what Maxar and SSL plan to do to finish satellites under contract.
You have won, in the past year or two, BSat-4B, SiriusXM 7 and 8, Eutelsat 7C and maybe the most complex, the EchoStar Hughes Jupiter 3 Ka-band broadband satellite contracts. Customers are worried about talent drain as Palo Alto nears what looks like a shutdown. What can you tell them?
It’s a legitimate concern and I would be foolish not to recognize that, and that it needs to be done properly. First of all, I reached out, and will continue to do so, to every single customer that we have — both those under construction and prospective ones.
I recognize this is going to be challenging to outside customers.
So just sticking with the spacecraft under construction.
For Jupiter 3 in particular, we are about a year into the construction. We are reaching the closure of a number of design options. SSL has always prided itself in being very close to the customers, so Pradman [Kaul, Hughes CEO], Adrian [Morris, Hughes CTO] — all the EchoStar guys, Anders [Johnson, EchoStar chief strategy officer]and [EchoStar President] Mike Dugan and all the technical interfaces are very much involved in all of this.
My point is that we are about to reach closure on all the practical innovations that have to happen within the timeline of the program. We are closing on designs as we speak. As you close the designs, you have a more predictable future.
So this is an important milestone.
Absolutely. The more designs you close, the more you can go into the second phase, the building of the satellite where you have more understanding, almost a mechanical understanding, and a more-predictable downstream.
So it’s a different skillset?
It’s not only the skillset. It’s also that now you have an understanding of the milestones, with less risk involved. Most of the risk, particularly in this kind of endeavor — I call it affectionately, the mother of all satellites, given the 18 or so innovations it includes — and you feel good about this, that’s where the risk factor is.
How do you keep people from leaving?
We are planning a retention program across the work force. We have passionate individuals that like to come to work for the mission, for satellites and space. It’s always nice to put on your resume that you worked on the most complex and demanding satellites.
But it would be foolish to think that’s the only reason people come to work. They have to pay their bills, and think of their careers. And for that we are implementing a retention.
And this gives people incentives to stick it out?
This is both for general talent that needs to be across the totality of the programs. In addition to the ones you mentioned, we have RSGS, Restore-L, Psyche.
The three longest ones are Jupiter 3, RSGS and Restore-L.
Can RSGS and Restore-L go go San Jose?
Every time you do things outside of Palo Alto it raises the investment required. We want to be careful we don’t compromise the building of the San Jose facility, which is to be state of the art for smallsat building.
Of course you could do lots of things there. It’s a big space, and if you have cranes coming from the top and so forth, this can be done. But why would you do that?
So you would include RSGS and Restore-L in with SXM 7/8 and Jupiter 3 among the projects you want to complete before Palo Alto goes away?
Yes, we want to make sure we build those satellites, including Jupiter 3, in the right location, which is Palo Alto. I would not use the phrase “Palo Alto goes away,” but I understand that one of the scenarios is this.
Even your competitors, who will be advantaged by this, have said they are not cheered by the possible closure of a site with so much history — back to Ford Aerospace.
I can’t agree more. I am just saying that at this point in time I am way more optimistic than simply focusing on option three.
Several companies you have approached with the idea of a merger or sale have said they can’t do it, especially given that you have valued the real estate alone at up to $200 million.
Yes, we are saying that. It is a nice neighborhood and we have been asked about it for many years and we said we didn’t want to do anything about it. But now that the GEO communications market is slow, that will be part of the equation.
So all employees you need for these programs have been incentives to remain until they end.
It is necessary and it is a commitment on our side. We are not going to walk away from our contractual commitments. I said it today publicly because I wanted everybody to understand that we don’t take this lightly.
Not only do we have commitments on construction. We want to maintain a commitment when it comes to on-orbit support.
How do you do that?
I’ve told you I am not focused on Option 3 but if we have to talk about it let’s talk about it. If a sale occurs then it becomes obvious that the contracts transfer with the work force on the other side. But if, God forbid, we are forced into a graceful exit, this is the way we are thinking about doing it:
First of all you always have a book of business coming from the contracts in place and revenues to pay the on-board services support team. Call that Level One — the ones that answer the phone if there is a problem and provide the first level of support.
But that’s not sufficient because if you have an anomaly as you well know, then the 15-20 people you have in the command and control center can only go so far in debugging the system.
So they way we are thinking about doing this is, the skillset in quality and quantity that goes with the smallsat business unit, which includes a lot of other things beyond small satellites — space and exploration systems with NASA, robotics, on-orbit servicing. It’s way more than just smallsats.
My point is that within that you are going to be able to find the resources and talent to be able to tap into when there is an anomaly that they have to take care of. With the first line of defense many of the same people there when the satellite was built 5-10 years before will be there. But we are going to go beyond that. We have MDA too.
These were SSL contracts managed out of Palo Alto. Can that expertise be transferred to MDA?
It all depends on how complex the anomaly is. If you need the exact people who build the satellite 10 years ago, that’s difficult. Most of the time, we have an architecture that is understood and that knowledge is around enough to debug the problem. We also have expertise in DigitalGlobe, in addition to MDA.
And should we ever get to the point where that is not enough, we have some great relationships in the industry that we can tap into for some special skills.
The WorldView Legion high-resolution optical satellites for DigitalGlobe will be built in San Jose?
Yes, that is in fact the crown jewel of the small satellite business unit. To clarify, when we say smallsat is 100-200 to 750-800 kilograms. That’s the sweet spot.
What is the status of the San Jose, which you will convert into a small-satellite production plant if Palo Alto is shut down?
A: We have a location in south San Jose, what we call the Palo Alto extension facility. It’s always been there as real estate for what we call the Palo Alto extension, as we call it, at SSL. The point is that it’s in a different location, with lower cost, with incentives from the city of San Jose.
What is good about it is that it has a significant number of employees that are able to reach that location without changing fundamentally their driving patterns. It’s about a 45-minute drive, in traffic, from Palo Alto. For some people they will actually be closer to the location.
What is this facility now — an empty building?
No it’s not an empty building, it’s a building we are using to be a satellite adjacency to Palo Alto. There is some assembly going on. We are doing solar arrays there. We can easily move things around to make room for the build of small satellites.
Can it handle something as large as the Telesat LEO contract?
Yes, but as we continue to work with Thales [Alenia Space] on Telesat LEO, there are multiple variables. It’s not just about finding a location to build whatever number of satellites web have. We need to properly consider the content of the award in terms of technology suppliers and work force.
Like any big investment, Telesat would like to have Canadian subsidies, French subsidies and U.S. subsidies. It’s beyond the fact that we can and would if that’s the solution. It’s big enough to do that in San Jose. But it’s not the time to be making these calculations.
The combinations of work possibilities here are numerous. There’s the Canadian angle, the French angle, the U.S. angle. You want to have people and supply and industrial base issues resolved, and technology risk reduction resolved so maybe the first are built in San Jose but then you move into Canada and France.
But we are so early in this project that I would not go into these details yet.