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WASHINGTON, D.C., U.S.A., 1999 JUL 28 (NB) -- By Steve Gold,
Newsbytes. Reports are circulating that Motorola [NYSE:MOT] is quietly negotiating a financial reshuffle of Iridium [NASDAQ:IRID] with fellow major investors in the financially troubled satellite telephone operator.
As reported previously by Newsbytes, after lurching from one problem
to another this year, the satellite phone operator slashed its handset
pricing by up to 75 percent, as well as more than halving its call
rates from July 1 onwards.
This action was taken because of Iridium's continuing failure to reach
its subscriber sales targets. August 11 is now the next "D-Day" for
the company, at which stage it must reach 27,000 subscribers - a level
that the firm was originally targeted to reach in March.
After laying off 15 percent of its staff during July, Newsbytes'
sources suggest that this sales target may be achieved, with the group
having just inked a 1,000 handset deal with the US State Department.
As reported previously, Motorola has an 18 percent stake in Iridium
and is unlikely to let the satellite phone operator slide towards
Chapter 11 or worse.
For this reason, reports suggest that the company is prepared to sink
$400 million into the operation - enough to maintain the firm's major marketing momentum - providing around $1.5 billion of Iridium's bonds are surrendered in return for a 25 percent stake in the satellite operator.
This move may be enough to turn Iridium from a lame duck into a
realistic proposition, Newsbytes notes. It would also increase
Motorola's stake in the operation to some 40 percent.
A spokesman for Iridium Press Officer Michelle Lyle's office declined
to comment on the reports, but a press announcement may be made before the end of the week, Newsbytes understands.
The Motorola-led rescue package could be bad news for shareholders in Iridium World Communications, who currently have a 14 percent stake in the satellite operator. They would see their share investments diluted by up to 95 percent, taking the effective share price to well below one dollar.
The State Department, meanwhile, has signed on the dotted line to take around 1,000 Motorola 7500 handsets plus accessories from Iridium, as part of a $1.4 million deal with the satellite operator.
As reported previously by Newsbytes, the Motorola 7500 handsets are the "least sexy" of the Iridium handset range, with Kyocera's units being the most popular. Effectively dumping the Motorola handsets on
the government's doorstep is viewed by many as a way of reducing Motorola handset stock levels at Iridium.
Newsbytes understands that the Department of State and other US
government agencies plan to use the equipment to expand their communications capability and enhance security abroad.
These agencies implement the President's foreign policy agenda and
provide important services to American citizens. The State Department
maintains about 260 diplomatic and consular posts that also provide
the necessary infrastructure for about 30 other government agencies.
Bill Turkaly, general manager of Motorola's US Federal Government Markets Division, said that the purchase of the Motorola 7500 handsets from Iridium "is a significant endorsement for the world's only global satellite telephone system."
Sue Kennedy, Iridium's vice president of sales and marketing,
meanwhile, said that the satellite phone service can be vital to any
global enterprise that has concerns about the reliability of local
telephone networks in the event of a crisis.
"We're delighted that the State Department has recognized this and
has chosen the Iridium technology to enhance its telecommunications
capabilities worldwide," she said.
Iridium's Web site is at iridium.com . The site has just
been radically updated to point users at sales outlets worldwide, as
well as allowing them to buy handsets online.
Reported by Newsbytes.com, newsbytes.com .
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