<Besides, the governement will need this co's system and they won't let it go bankrupt. How about usage in the military? I think the marketing guys of this co are ....>
Peacelover, you need to separate the company and the system. They are not the same thing. The government and everyone except the shareholders, bondholders and creditors are indifferent to the company. The system will continue in operation for 10 years [at least] and that's what the subscribers, government, operations staff and suppliers are interested in.
The government and military certainly want the system to keep operating and so it will, because the operating costs are so low [unlike Iridium's] that new owners without debt and exclusive service provider agreements entangling them, could easily sell all the minutes and make big profits.
There might be new owners if the service providers and Globalstar can't figure out how to sell the minutes from this excellent system invented by QUALCOMM. But the operation of the system won't miss a beat in a bankruptcy and change of owners.
There is nothing supporting this company other than MOU sales. As soon as MOU don't look as though they'll support the financial structure, financial support will be withdrawn, the business will collapse and new owners will move in.
The marketing people do seem to have achieved almost nothing [13,000 handsets so far - we have no information that any more handsets or minutes have been sold since June, and a million minutes or thereabouts]. Peter White gets good reports for the Canadian efforts, but even there, they are using a high price and limiting sales dramatically by doing so. Vodafone Australia is allegedly doing well but I have nearly zero evidence of that and evidence that they are doing badly [phones kept in the back of shops for example]. France had sold 1000 phones. Elsacom 1,200 being the last number I saw. UK no numbers at all [that I can recall].
The big profit is in minute sales, so the idea of having a high price to start [as in other electronic sales fields] and then lowering the prices once the early-adopter, high-margin, high-priced, limited-availability markets are satisfied does NOT apply to Globalstar.
In most new electronic fields, say PDAs, fax machines etc, the cost of the device is high, production capacity low, so the few devices available should be sold at high prices to extract maximum dollars from those most keen to have the new gadget. As the market develops and production increases and high-value niches are satisfied, prices are lowered to generate new sales. New high-priced models will be introduced to satisfy high-end users. Competitors enter and prices fall, production costs fall. Etc, etc.
That is totally different from Globalstar's situation, but I don't think the marketers understand the difference.
In Globalstar the whole dirty great constellation is built all at once and switched on! The whole 10bn minutes start rotting on day one. Yes, there are some gateway buildouts to be done, but those minutes have been available for most of this year and in some areas all of this year.
In the electronic gadget market, they don't produce 10 billion fax machines and store them in a warehouse for half a decade. They produce just a few to start with to see how it goes, then increase production, change design etc as the market develops. In Globalstar, we've produced the whole 10 billion all at once and are producing them at the rate of 1 billion a month, sold or not. We can't even put them in a warehouse.
The value of 10bn minutes is about $10bn in profits [to the service providers and Globalstar combined at the current retail prices]. To use those 10bn minutes, they need something like 10 million subscribers [assuming 100 MOU per month per subscriber and no fixed units with high throughput]. The clear profit from 10 million handsets is only about $1bn at current retail prices. So they are NOT making a lot of money by selling handsets at high prices to early-adopters and high-value niches.
The money is in the minutes. The revenue from 5 years of minutes is $50 billion. The revenue from 10 million handsets would be $10 billion [or which only a small portion would be profit].
The minutes have to get moving and fast. They are rotting at $10bn a year. That's the value opportunity which is going down the gurgler which is lost to humans right now.
The concept of starting high and working down in price, through the price points, high-end early-adopter to low-end low-value subscribers might be MBA marketing business school jargon, but it's real-world nonsense in the case of Globalstar. The minutes are rotting in space and if they were tomatoes valued at $1 each, the obvious would be intelligible to the earthbound marketers. In 5 years, we will have 50,000,000,000 rotten tomatoes circling the earth.
If they fell out of orbit randomly onto land as they decomposed, the bad marketing would be obvious everywhere to casual passersby.
If they all piled up around the Globalstar building in San Jose, the building would be buried quite deep and there would not be parking available in the carpark. Maybe Globalstar staff could be employed to make tomato sauce to recover something of value from Globalstar.
If it's true that GlobalstarUSA is having a great new promotion in a couple of weeks, let's hope they cut the price and get some free coverage in Time, CNN, Los Angeles Times, New York Times etc along the lines of
Globalstar Goes For Broke.
Noo Yawk. Monday 16 October
NY News Staff Reporter.
In a dramatic attempt to turn around sluggish sales and rescue the company from potential bankruptcy, Globalstar has slashed prices.
In the face of one of the highest levels of short interest reflecting investor concerns about the financial viability of the company, Globalstar is attempting to garner support by competing directly with high-priced cellphone roaming services.
A company spokesman, Mr Bernard Schwartz, CEO, told NYNews, "People have been unaware of the complete coverage of the continental USA, all the North Atlantic and much of the rest of the world's land masses and the high quality of the Globalstar service, including no voice delay. We have therefore decided to kick start some more Harley Davidsons and get some marketing oomph into Globalstar. Call it Wacky Wireless, but we have slashed prices for existing users and the first 30,000 new customers before the end of the year ..."
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