02/15/00- Updated 10:10 PM ET
Kevin Maney's column appears Wednesdays.
Iridium plan comes from out of the box
One hundred years from now, a man invents a time machine. He uses it to
voyage back to our era. He becomes a high-tech entrepreneur who has
seemingly supernatural insight into the future. He makes a series of
outrageous moves that all, of course, turn out to be right. He becomes a
billionaire.
Well, that might be one way to explain Craig McCaw.
Last week, McCaw maneuvered into position to take control of Iridium, the
satellite phone system now in Chapter 11 reorganization . On first blush, it
doesn't seem like anybody in his right mind would want Iridium, which was
invented and backed by Motorola. The project has become a punch line for
jokes about highly public business disasters. Iridium is to Motorola what
Waterworld is to Kevin Costner.
McCaw hasn't said a public peep about why he wants Iridium or what he'd
do with it. But chances are that if McCaw is doing something that appears
to be really stupid, it's because he sees something way beyond the reach of
most mortal minds. That was the case when he started the first major cellular
phone company back when nobody thought there was much of a market for
cell phones. It was true when he took control of dying Nextel, which is now
worth $43 billion. He could be doing it again with Teledesic, a
satellite-based high-speed Internet in the sky.
So what does McCaw see ahead? Although he's not talking publicly, one of
his most trusted colleagues, Bob Ratliffe, and a longtime friend and former
colleague, Gary Sutton, were willing to guide me through McCaw's mind -
as best as anybody can.
First, it helps to know what McCaw has in hand. He has Teledesic, which
won't be ready until 2004. He is taking control of ICO Global
Communications, a satellite phone and Internet system now in bankruptcy.
ICO won't be up until 2001. McCaw also has his reputation for success,
which allows him to raise almost as much money as he wants.
McCaw is guided by an overarching plan that is new within the past few
months. "The program now is to be the predominate satellite
communications company of the 21st century," Ratliffe says. Before,
McCaw was concentrating only on Teledesic and often said it would be one
of many competing satellite systems. But apparently he's now aiming to be
the big kahuna of satellite-based communication.
Iridium and ICO could help him start on that path now rather than in 2004.
Iridium is up and it works, which would give McCaw customers today. The
customers could migrate to ICO - a more powerful system - once it gets up,
and Iridium and ICO might be made to work together to provide varying
levels of service. Teledesic could add a highest level of service in 2004. "We
now have teams looking at how to make the whole thing work together,"
Ratliffe says.
McCaw, always flexible and opportunistic, changed plans once ICO and
Iridium ran into trouble and wound up in the fire sale bin. Both should end
up looking like bargains, full of hidden assets. Iridium, for instance, owns
highly valuable licenses to operate in 100 countries and has built the world's
most sophisticated billing system, able to track calls in any country and
convert currencies.
Meanwhile, the design for Teledesic is in flux, though its goal is still the same:
offer high-speed data communications anywhere. McCaw's grand vision
hasn't changed, either. He believes the worldwide demand for high-speed
Internet will far outstrip the ability to build wired networks to meet that
demand. By putting up satellites, McCaw can turn on the whole world at
once.
That's the nuts and bolts of McCaw's business outlook. But to get a real
taste of how McCaw thinks, here's a story from Sutton, who went to
Harvard with McCaw, co-founded Teledesic and is now CEO of Web
company At Backup.
"In 1988, Craig invited me to Seattle to talk about big ideas," Sutton says.
"He asked me to bring my 10 best new business thoughts. We closed his
office door, ordered Domino's pizza, and I wrote down my 10 best on his
whiteboard. One of the 10 was bottled water. I had just looked at a
bottled-water company, and liked the growth and margins.
"So, I went through my list of 10 promising businesses quickly, giving a
rationale for the promise of each. Craig leaned back. Then he volunteered
one. 'It appears to me that Mexico may default on its debt,' he said. 'This
will destabilize currencies and squash the middle class in that country. I was
thinking that could be avoided if we borrowed the money to pay their debts
and collateralize it with Baja, Mexico, which Central Mexico doesn't know
how to handle anyway. We could build some better schools and churches.
Sell off the waterfront property for $20 a foot, with tough development
restrictions to create a pretty country and booming tourist economy. The
center portion would then be free and clear, and I think it holds natural gas.'
"Well, I leaned back, glanced at the whiteboard, and for some reason my
eyes whisked across 'bottled water.' That was one of those moments when
you realize we each have different horizon lines and, while I'm often out of
the box, Craig is out of a far larger box." |
