GeoEye shares tumble on loss of government contract Mon Jun 25, 2012 9:54am EDT (Reuters) - Shares of GeoEye Inc fell 26 percent in morning trade, after the satellite imagery provider said the U.S. National Geospatial Intelligence Agency (NGA) will not renew a major contract with it due to budget constraints. GeoEye and rival DigitalGlobe Inc had won contracts worth $7 billion from the NGA to provide high-resolution satellite images under the EnhancedView project in 2010. The intelligence agency on Friday proposed an option under which GeoEye would get service revenue of $39.75 million for the three month ending November 2012, and a nine-month option providing for $119.3 million, contingent on funding. The cuts will significantly lower GeoEye's profitability next year and it may not be able to pay its 2013 bond interest payments if the nine-month extension is not exercised, Benchmark analyst Josephine Millward said. The brokerage downgraded GeoEye's stock to "hold." Rival DigitalGlobe last week said the NGA plans to renew its EnhancedView contract with it for the third year. GeoEye had offered to buy rival DigitalGlobe in May for $792 million in cash and stock, but the bid was rejected. Against the backdrop of funding uncertainty, it is difficult to construct a scenario in which GeoEye can improve upon its $792 million bid, said JP Morgan analyst Paul Coster. "DigitalGlobe might be positioned to acquire GeoEye under favorable terms if the latter loses NGA funding," he said. Shares of GeoEye, which have fallen 23 percent since DigitalGlobe rejected its takeover offer in May, fell to a six-year low of $13.61 on the Nasdaq on Monday morning. The stock was among the top losers on the exchange. Reporting by Megha Mandavia in Bangalore; Editing by Joyjeet Das