TECH ENTREPRENEUR NOW ORBITING THE FINAL FRONTIER - SPACE

Investor's Business Daily
5/2/2005
By Brian Deagon

Musk Has Invested $100 Mil;
His company is set to enter commercial launch field vs. Lockheed, Boeing, Orbital

Elon Musk's nickname should be rocket man. His two goals on Earth are to revolutionize the commercial space industry and help humanity become a space-faring civilization.

He'll move closer to those goals if the rocket engine his company built completes a milestone test Tuesday at Vandenberg Air Force Base along California's central coast.

Musk , 33, is chief executive of Space Exploration Technologies, a company he founded three years ago with $100 million of his own cash. Musk sold his electronic payment company PayPal to eBay for $1.5 billion four years ago.

SpaceX will perform the last major test of its Merlin engine, designed to lift the company's 70-foot-tall Falcon I rocket into space.

When the actual launch happens, Falcon I will spew 71,500 pounds of thrust burning for 167 seconds, enough to hurl a 1,500-pound satellite into orbit. A second booster stage engine, Kestral, will burn for 420 seconds. The maiden flight is scheduled to take place in late summer, also out of Vandenberg.

The Falcon I launch would mark the first time a company funded entirely by private money has sent a satellite into space. SpaceX has contracts for more launches.

$4 Billion Market

Musk's gambit could pay off. The global market for payload launches is $4 billion a year, mostly companies launching satellites for military and communications customers. SpaceX is entering this market.

More than that, Musk expects the company will ferry passengers into space and help fuel other commercial activities that analysts say could evolve into a multibillion-dollar market. SpaceX is building a larger rocket, the Falcon V, for launching heavier payloads that could include space stations for people.

For now, the company has four separate contracts, worth $35 million, for its first four launches. The company says it's in talks for three more launches, worth $50 million.

And on April 18, the Air Force signed with SpaceX for a series of launches that could be worth $100 million. That's $185 million lined up for a firm that hasn't even done one.

But the SpaceX price is so compelling that customers are eager to sign up. A Falcon I launch costs 75% less than the going rate. The Navy is paying SpaceX about $6 million for the first launch. The typical price, says Musk, is more like $25 million.

Musk aims to turn the space launch industry on its head. The industry has been in business over 50 years, but prices have risen. Plus, at this point, he says the business isn't rocket science in the figurative sense. It's very doable, he says.

"If companies like ours do not step in and reverse that (price) trend, then we won't have a very exciting future in space," Musk said. "And science fiction will remain science fiction."

Musk expects SpaceX will wreak havoc on the three biggest companies that launch satellites: Boeing, Orbital Sciences and Lockheed Martin. Russia, France, China and India also compete.

Cheaper From Scratch

SpaceX has one huge advantage over its rivals. Musk started entirely from scratch, coming at it from a business perspective with a sharp eye on costs. He's using the most sophisticated lightweight materials, and the engine SpaceX has built is the first time any U.S. company has built a new one in 25 years. SpaceX also built a smaller engine to be used as a second-stage booster.

"Launching rockets is only a small portion of the business at Boeing, Lockheed and Orbital," Musk said, "but we will absolutely demolish their launch businesses."

His company has 110 employees and 75,000 square feet of office and warehouse facilities in El Segundo, near Los Angeles, in the heart of Southern California's aerospace industry. It also has a 300-acre site in Texas for testing.

Its El Segundo facilities, dingy-looking from the outside, are pristine inside. The spotless cement floors shine. Filters keep the air notably fresh. Millworking machines look new even after three years.

Musk dresses casually and has a cubicle like everyone else. He's remarkably open about company plans. Tall and husky, Musk speaks in a soft tone.

He enjoys his wealth. Musk lives in a tony house in the exclusive community of Bel Air. He drives a British McLaren F1. The world's fastest commercial car, it can hit 240 mph. Musk says his personal top speed is 215 mph, which he performed on an airport runway.

He ranked No. 12 on Fortune's 2004 list of the 40 richest people under 40. His estimated wealth is $328 million, mostly from the PayPal sale. He also sold his first startup, Zip2, to Compaq Computer's Alta Vista unit in 1999 for $307 million.

Despite his heavy investment in SpaceX, he believes he could make good money from the company. But he says that's not his goal. His dream reaches for the stars.

"We hope to colonize space," said Musk, "though yes, it might take 500 years."

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