Andy, this stream is now polluted with greenhouse gases from Yahoo! [compliments of djane] and Quentin Hardy who is an epistemological joke in the Qualcomm realm. I think it was he who wrote the infamous, FoolHardy and wrong 'Jacob's Patter'. There is no point phoning a joke. The joke can come here if he wants to. Brianh has done some good DD, travelling to China to investigate the Globalstar phone box applications.
I've not seen anything to suggest fraud in the Iridium deals. Maybe the Kyocera handsets were available and it was claimed they were not, but if that were not true, I guess Kyocera would have squawked, so it is probably true that they were unavailable or technically deficient. Sure, there was heaps of wishful thinking, but that isn't fraud. Plenty of people who are quite capable of sizing it up were happy about Iridium prospects up to a few weeks ago. Dragonfly for example. LarryL.
Sure, Motorola was greedy, but the contracts with Motorola were open for shareholders to think 'Whoa! $800m for messing around keeping a few satellites on course...that's steep'. They could have not bought the shares. Sure, Motorola is charging heaps for the handsets, but those prices were always stated and if the transfer of value to Motorola by these handset prices wasn't obvious, then the Iridium shareholders were blundering around with their eyes shut.
I'm interested in exactly what Iridium fraud was perpetrated. I haven't seen one. Quentin was trying to accuse Irwin Jacobs of untoward business practises too. So much for Quentin! Irwin proved Quentin to be the one perpetrating the falsehoods. You should not depend on Quentin for anything given his hopeless opinions on Qualcomm. Quentin is the one needing educating.
Iridium is no threat to Globalstar. If they give their minutes away for no charge at all, it barely affects Globalstar. Iridium has only 1.5bn minutes per year to give away and only for another 5 years at the most, [assuming they can fund operations some way]. 1.5bn minutes per year is trivial compared with Globalstar's 10 or 12bn and ICO's 15bn [or whatever]. Iridium is in the process of becoming a case study for MBA school.
Iridium won't even be able to sell handsets now. People won't want to buy them for $2000 and end up with the system shut down in a few months. The handsets will have to be leased on a monthly rental so that the subscriber isn't carrying the risk of bankruptcy.
Iridium is now a footnote.
The idea that Globalstar stock will drop to the mid teens or whatever is faulty too. If Globalstar starts operations this year, then whether they sell 10bn minutes/year at 10c a minute or $0.50, they are going to make a LOT of money and the stock price at $20 is wayyyyy underpriced. If demand is so great that they actually can sell the minutes at 50c then Globalstar will be absurdly profitable. That level of demand at 50c seems unlikely and the business plan is for nearly a decade of subscriber growth to reach capacity. Even on a slow boat to China, Globalstar will make big profits.
So hoping for less than $20 is using the greater fool theory in reverse. If one believes that the value of Globalstar in 3 years will really be $100 or so, then to wait for a drop from $20 is silly. Sure, it might happen. But it might not. Hoping for a dope to sell their stock at $13 is unwise. They might, but they might not. Most investors know Iridium is nearly bust and plenty of people know that Iridium's woes are irrelevant to Globalstar. Any sellers of Globalstar will meet plenty of buyers.
If Globalstar sells their 12bn minutes [as they obviously think they can] at 50c per minute, they will get $5bn per year profit. With about 250m shares, that works out to $20 per share profit. [Give or take a billion here or there for operating costs]. With profits of $20 per share at a P:E or 40:1 [which is reasonable given the growth rate over the next 15 years] the share price would be $800 per share.
So, who would sell their stock in the low teens?
Maurice
Footnote:
//Quentin Hardy, a reporter for the Wall Street Journal, who has written accurately and fairly about the Iridium system from the start, has an article out today (it should be in tomorrow's WSJ) about Iridium's latest travails. In it, Hardy discusses two points that should give Globalstar afficionados some pause: Maximum international rates are likely to be $3.00, and smaller phones will be available by the 4th quarter.//
Quentin wrote accurately about Iridium from the start eh? So he predicted the failure? Now he bungles some more by saying Iridium is some threat to Globalstar. No it isn't. For the reasons I explained. All they can do is sell their 1bn minutes, then game over. |
