Reason for Iridium price decline: First, a rumor began circulating that additional satellites had failed (rumor denied by company); second, there were concerns expressed that Iridium would be in violation of its bank covenants if it did not have at least 27,000 subscribers by the end of the first quarter (the company said this is true - then said it would "renegotiate" the covenants if it were in violation).
I have a couple of thoughts here. First, the satellite issue is a non-issue. Technology has not, for some time, been the "Iridium issue" - finance has. Second, the release of the Kyocera phone today, and the subsequent press release, did nothing to stem a stock price decline, indicating deeper concern in the marketplace than I realized. Third, if the company managed to eke out 27,001 subscribers (or 50,000 for that matter), the market would not be impressed, and the stock would drop IMO. I think it will take a 6-figure subscriber number by March 31 to mollify Wall Street.
Iridium's stock reminds me of Dennis Weaver's character in one of Steven Spielberg's early films, "Duel", about a hapless motorist trying to outrun a supernaturally evil 18-wheeler. The 18-wheeler is the stock market, and Weaver's car is Iridium. Weaver survived, but only by tricking the truck driver into driving off a cliff. I suppose that could be Iridium's legacy - to survive in relative terms, simply because the market drove off a cliff while it limped home on 2 cylinders.
I hope I'm wrong... but as a subscriber and investor, I am watching their every move, as is every analyst who follows Iridium. In a way, I'm coming around to Maurice Winn's favorite theme, pricing; Iridium should perhaps cut the phone price to $500, load the market with subscribers and show the world there is a market for the service. As it is, they're selling 10 cent razor blades with a razor that costs $1000.
Anyone for a nice cutthroat round of golf about now? |
