As Deadline Nears, Iridium Shapes Up
By Kathleen Cholewka
June 28, 1999 3:32 PM ET
Iridium, the satellite communications company facing
a June 30 investor deadline to meet sales and
customer numbers, made several marketing and
management moves last week.
The company's backers imposed a set of
requirements on the company - targets that include
$40 million in sales and 52,000 customers. Analysts
said the company will not meet those targets.
But Iridium executives have taken some serious steps
to right the ship, and most analysts believe the
company may get a reprieve. Iridium spokeswoman
Michelle Lyle said the company will announce
additional financial restructuring plans this week.
Iridium took action on many levels of the organization.
On a press call last week, Iridium Chief Executive
John Richardson said the satellite network owner will
slash prices on its services and handset, as well as
concentrate its sales force on securing industrial
accounts.
The company last week backed out of the proposal it
made in late 1998 to acquire satellite service provider
Claircom Communications Group for $65 million.
In addition, Iridium said Motorola, which has a 20
percent stake in the satellite company, will dedicate a
specially trained 200-person sales unit to beef up
North American subscriber numbers. Richardson fired
about 500 employees, mostly from Iridium's marketing
department, which has produced low sales so far.
"We made a mess of the first few months,"
Richardson said. "This addresses the lessons we
have learned."
While the company may be righting itself, it has
continually failed to make its bankers' requirements
for customer and revenue levels. With the latest
moves, said Greg Caressi, research manager in
satellite telecom at analyst firm Frost and Sullivan,
"they're positioning themselves for the future."
Experts said the company will be given a chance to
carry out its new plans, since bankruptcy or a buyout
are unlikely. Bankruptcy will not be a viable option,
since bankers will not be able to reap monetary
benefits from a down-and-out company, according to
Caressi. And buying a company in Iridium's state is
still risky.
But even with an extension, time is short. The
company will face competition next year when
competitor Globalstar launches its services.
What's more, the satellites Iridium now has in place
have only a five-year life span. Iridium is working with
Motorola to extend the life of the system by adding
more satellites to its network over a period of time and
extending the pattern of satellite launches.
Richardson, however, remains confident. "Clearly, we
have a few years to go before we worry," he said.
Part of Richardson's plan is to target specific markets
such as aeronautics, agriculture, disaster relief,
forestry, government, heavy industry, maritime and
the military, he said.
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