Hmm. So I guess the numbers weren't just "background noise" after all. Judging from the stock's price move this morning, investors weren't at all willing to dismiss GeoEye's (NASDAQ:GEOY) earnings disappointment (sales down 29%, profits down 79%) Tuesday.

But just because I wasn't right in my prediction, doesn't mean Wall Street is right to be writing down this Motley Fool Rule Breakers recommendation today. Fact is, things are looking up for GeoEye. But before we get to that, let's examine what went wrong:

Uncle Sam wants his cut
After extensive study, GeoEye finally concluded that it owes Uncle Sam some money. Basically:

  • The Feds are paying $237 million toward the cost of building the new GeoEye-1 satellite.
  • GeoEye miscalculated when it needed to pay taxes on this income.
  • As a result, it may have incurred as much as $35 million in interest and penalties.
  • GeoEye's revising its financials for the past few years to account for the goof.
  • But it's also asking the IRS to look the other way on interest and penalties. (Fingers crossed.)

Complicated, I know. But take heart from these words by CFO Henry Dubois: "In summary, our tax liabilities have not significantly changed ... We are confident that we've put these issues behind us ..."

So all the tax stuff is history at this point. Now let's talk about the future. GeoEye's revenue declined primarily because while it was waiting to launch GeoEye-1, rival satellite snapshooter DigitalGlobe (DG) put is own "NextView" bird in orbit. "The National Geospatial-Intelligence Agency ... may have reallocated imagery orders to our competitor" ... and away from GeoEye.

Logically, though, if Boeing (NYSE:BA) ever gets around to launching the ol' "Dash-1" satellite, NGA will want to take advantage of the new resource and reallocate some orders to GeoEye. When can we expect that to happen? According to GeoEye CEO Matt O’Connell: "Full certification of the quality of GeoEye-1's imagery by NGA is expected in the late October time frame," at which point GeoEye should move into a "predictable and sustainable revenue stream."

Ah, predictable revenue streams. That should make Wall Street happy.

Meanwhile, investors can smile at some other good news: Lockheed Martin (NYSE:LMT) just completed a new life-expectancy study of GeoEye's old-but-still-flying IKONOS satellite, which provides images for the map features at Google (NASDAQ:GOOG) and Microsoft (NASDAQ:MSFT). The upshot: Previously thought to be living on borrowed time, IKONOS may well keep pulling in revenue through next year, and perhaps beyond.

Check out our last several articles on GeoEye:

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Fool contributor Rich Smith owns shares of Boeing. Microsoft is a Motley Fool Inside Value pick. Google is a Rule Breakers selection. The Motley Fool has a disclosure policy.