Maybe you’ve heard of Rocket Lab, the scrappy New Zealand-based launch company whose innovative Electron small-lift rocket quickly became one of the most popular in U.S. service, thanks to its high success rate and rapid launch cadence. Except for nerds like me paying close attention to the launch industry, Rocket Lab gets a little lost in SpaceX’s shadow. But that might be about to change with the company’s multibillion-dollar acquisition.
Rocket Lab said Monday that the company plans to buy that other satellite network operator, Iridium Communications, in a cash and stock deal that values the company at $8 billion.
“This is a defining moment for the space industry and the start of a new era of strategic, accelerated growth,” Rocket Lab CEO Peter Beck said in a statement, adding that the combined companies will have the capability to “unlock entirely new markets.”
Beck isn’t buying Iridium just so he can add a big satellite operator to his collection. He’s basically copying the vertical integration model that made Musk a trillionaire: Build the rockets, own the spacecraft, operate the constellation, and collect recurring subscription revenue instead of relying on launch contracts alone.
But there’s a lot of work to be done first, largely financed by investors impressed by the company’s small rocket.
Electron is a nifty little carbon-composite rocket that uses electric pump-fed, 3-D-printed (really!) Rutherford engines. It’s launched 91 times so far, with 86 successes and just five failures for a 94.5% success rate. Rocket Lab reports a 100% success rate since the rocket’s most recent anomaly (that means it went kablooey or something) way back in 2023.
It’s considered the gold standard for your small satellite launch needs.
Sometime between this year and 2029, the company hopes to put its Neutron medium lift rocket to work. Neutron is designed from the ground up (way up) for rapid reusability, making it a direct competitor to SpaceX’s workhorse Falcon 9.
And Another Thing: Even if Rocket Lab executes this strategy flawlessly, it’ll still be chasing a moving target. While Beck is building a Falcon 9 competitor, Musk is trying to make Falcon 9 obsolete with Starship.
But the major reason Falcon 9 is so economical is that it launches so often, squeezing maximum value out of each reusable booster. Currently, SpaceX is working on getting each one to fly 40 times or more, and the record is more than 30 flights from a single booster. What makes that cadence possible is Starlink, the company’s satellite internet service provider subsidiary. They’ve put more than 10,000 Starlink satellites in orbit, roughly two dozen at a time — and I’ll leave the math up to you.
It isn’t often appreciated, but Starlink quickly became SpaceX’s cash cow, generating more than $10 billion in revenue last year, rapid growth, and an estimated $4.4 billion in operating profit.
Put simply, there’s an awful lot of money on the table for anyone able to provide orbital internet service, and SpaceX takes the lion’s share of it. I think they get the lamb’s share, too.
Iridium is Starlink’s big brother that failed to take advantage of its head start. SpaceX didn’t just beat Iridium at its own game; it rewrote the rules. That’s why Iridium has just 2.5 million customers worldwide, generating less than a single billion in revenue, and just $115 million in net income.
But once this deal goes through, Rocket Lab will have access to Iridium’s know-how and customer base. Soon, the company hopes to field Neutron as a Falcon 9 competitor. Pair that with Rocket Lab’s hard-won reputation for doing things quickly and inexpensively, plus Iridium’s decades of experience running a satellite network, and you have something SpaceX hasn’t really faced before: a competitor taking aim at its cash cow.
Competition is good.
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