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Dan Friedmann, president and chief executive officer of MDA (LAURA LEYSHON FOR THE GLOBE AND MAIL/LAURA LEYSHON FOR THE GLOBE AND MAIL)
Dan Friedmann, president and chief executive officer of MDA (LAURA LEYSHON FOR THE GLOBE AND MAIL/LAURA LEYSHON FOR THE GLOBE AND MAIL)

Report on Business

For MDA, space pays Add to ...

"It's the way it should be," he said in his first in-depth interview in almost a decade. "Our customers don't want to walk into the Taj Mahal - and our investors don't want to pay executives ridiculously. I'm pretty serious about treating the company's money as if it was my money."

MDA began life in 1969 as an electronics company that specialized in processing information relayed from space satellites. When Mr. Friedmann became CEO of MDA in 1995, he told Mr. MacDonald his goal was to drive the company to $1-billion in annual revenue, a tenfold increase from the $100-million or so it was doing at the time.

Mr. Friedmann knew that MDA needed something more than the space business to reach that goal. So he turned his sights to earth.

Building on the company's expertise in developing advanced software applications, Mr. Friedmann scored a deal to take over BC Online, a system previously run by the British Columbia government, which provided data such as land titles and property information. Other acquisitions followed. While the space business had once been MDA's jet fuel, the earthbound business of delivering property information quickly became the firm's primary propellant - and, just as Mr. Friedmann promised, sales hit $1-billion in 2006.

Meanwhile, after years of rapid growth, MDA's space business sputtered earlier this decade. The primary culprit was Ottawa's tight-fisted approach to space. In an industry where most participants depend heavily upon government projects and contracts are usually doled out on nationalistic grounds, government spending is crucial.

Seeing no great upside in the business without additional spending from Ottawa, Mr. Friedmann decided in 2008 to sell the space division to Alliant Techsystems Inc. of Minnesota for $1.3-billion.

That's when Ottawa stepped in. MDA owned Radarsat-2, a surveillance satellite built for $600-million, mostly with funds provided by the federal government. Selling its space division would mean handing ownership of Radarsat-2 to a U.S. firm. Prime Minister Stephen Harper feared a gaping hole in Canadian sovereignty if the country lost its prime surveillance vehicle for regions such as the Arctic, and he blocked the deal.

Implicit in the blocked sale was a promise by Ottawa to put more dollars into space projects. The money quickly began to flow. MDA won a deal to provide unmanned aerial vehicles to the Canadian military in Afghanistan, a victory the company then repeated with the Royal Australian Air Force.

This year, Ottawa backed Radarsat Constellation, the successor to Radarsat-2, bolstering the proposed $870-million project by putting $400-million of new cash into it. MDA is the lead designer.

Ottawa is helping in other ways too. Late last year, Export Development Canada, a financing arm of the federal government, provided a $254-million (U.S.) loan to the Ukraine government so it could buy a communications satellite from MDA. The loan was essential for MDA to beat out Thales, a much-larger French rival, and the deal was made official Friday.

As a result of the new government support as well as its own initiatives, MDA is punching well above its weight. "Size-wise, MDA's going up against juggernauts [like]Boeing, Lockheed," said Steven Li, an analyst with Raymond James. "They're winning more than their fair share, for the size of the company."

A complex operation

Mr. Friedmann wants even more, especially in space. "The Canadian space budget is the PR budget of NASA," he said. "We have no long-term space plan. China's going to space, India's going to space. It's where the action is, where new stuff gets developed, unless you want to be a military power. Every day we're slipping back."

A gas station in space would give MDA a cornerstone business, with revenues that would recur year after year, no matter who is in power in Ottawa.

The concept sounds simple. A satellite holds a constant orbit around Earth by firing a booster rocket to adjust its course, using a propellant called hydrazine. Once the hydrazine is gone, even if everything else is still working, the satellite's useful life is finished. But if MDA can design and launch a refuelling station, the life of the satellite could be extended, perhaps by years.

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