On Thursday, July 21, 2011, at 5:57 a.m., America's last space shuttle landed safely at Kennedy Space Center, bringing to an end to America's manned odyssey in space. 542 million miles traveled, 355 astronauts served, 1,333 days spent in space -- over and out. But what comes next?
Over at Vandenberg Air Force Base in California, PayPal founder Elon Musk is working hard to answer that question. When not busy tinkering under the hood at his Tesla
What's better than "cheap?" Cheaper ... and better
For decades now, Boeing and Lockheed have dominated the race to space. They helped get the space shuttle airborne, and for missions not requiring "boots above the ground," developed heavy launch rockets to loft spacecraft into earth orbit and beyond. Delta IV, Atlas V -- United Launch Alliance's rockets are famed for their ability to lift multi-ton payloads into space.
Recognizing this, companies like Orbital Sciences
Already, SpaceX has won contracts to service the International Space Station, and help Iridium Communications
Of course, "it takes money to make money." In contrast to his Tesla venture, Musk is said to have built a truly profitable business at SpaceX. Still, he's going to need a whole lot of profit if SpaceX is to complete development on Falcon Heavy and get it ready for demo by the end-of-2012 target date. Just getting Vandenberg upgraded to support the liftoff blast will cost $30 million, according to SpaceX. To help with the financing, SpaceX is said to be mulling an IPO that could come as early as this year.
As I said earlier this year, I'm excited at the prospect of investing in an honest-to-goodness profitable IPO like SpaceX -- but I have to wonder whether Boeing and Lockheed will be as pleased at this development. I mean, if they're abandoning the medium lift market to Orbital, you have to figure that's because it's not as profitable for them as the businesses they're remaining in. And if ULA is picking up launch fees two to three times what SpaceX says it will charge for Falcon Heavy, you have to figure heavy satellite launches are profitable indeed.
Now, SpaceX is threatening to take that business away from them. Within less than two years, a business that just lost a major customer in the shuttle program could begin shrinking even further. You see, it doesn't really matter whether SpaceX wins contracts away from Boeing and Lockheed outright, or if it simply forces their prices down by offering lower-cost launches. Either way, ULA loses revenue, and Boeing and Lockheed see their profit margins shrink.
It's no fun to be an incumbent in a profitable business when an upstart disruptor appears on the scene. If Musk and SpaceX are able to make a go of Falcon Heavy, it won't be much fun to be a Boeing or Lockheed shareholder, either. For early investors in the SpaceX IPO, however, it could be one heckuva wild -- and profitable -- ride.
The Motley Fool owns shares of Iridium Communications, Northrop Grumman, and Lockheed Martin. Motley Fool newsletter services have recommended buying shares of Orbital Sciences. Try any of our Foolish newsletter services free for 30 days.