Industry turbulence stalls Orbcomm -from MSNBC
ORBI now ORB on NYSE
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Excertps
That backdrop is one reason that Orbcomm, which had hoped to sell 7.6 million shares in a $15 to $18 price range last week, was attracting prices in the $7.50 to $8 a share range, according to market analysts.
Orbital's own technical difficulties contributed to the weak demand for Orbcomm shares. Though Orbital has launched 12 Orbcomm satellites, it has twice delayed launches of Orbcomm's next 16 satellites, and analysts say the company has failed to properly explain why.
At the same time, Orbital has encountered glitches on other projects. An experimental satellite built and launched for Teledesic, a proposed broadband satellite network, has reportedly ceased functioning (Orbital and Teledesic officials declined comment). And Indostar, a direct-broadcast-satellite system providing television service to parts of Asia, has experienced battery problems, though Orbital spokesman Barron Beneski says the problem hinders the satellite's channel capacity for only a few early morning hours two weeks a year.
The problems "raised concerns about quality control issues at Orbital," says Thomas Watts, vice-president at Merrill Lynch. "A few years ago Orbital had some significant problems in that area, and people had assumed they fixed those."
Another source of trepidation about Orbcomm is uncertainty about the size of the market for its services. Despite the rosy projections for revenues from the Little LEO systems, Orbcomm is not going to have the business to itself.
"When you look at [Orbcomm's] addressable market, it's getting more and more competitive," says Bob Egan, research director for wireless at the Gartner Group.
Egan notes that Bell South Wireless and Ardis, recently purchased by American Mobile Satellite Corp., already have ground-based, wireless data networks that provide the type of remote monitoring services that Orbcomm plans to offer. And he expects most current cellular phone providers to develop similar services in coming years.
Other analysts note that Orbcomm's brick-sized base units are big and expensive, around $500 apiece, which could further hinder demand.
Despite those concerns, Tim O'Neil of Soundview Financial Group says Orbcomm will eventually receive a strong reception on Wall Street. "Once they can show further development in their program, whether with customer contracts, an increased and stable constellation, or strong strategic partners, they'll have a very successful IPO," he says.
For thos who doesn't know this yet.
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