*Iridium in the shop* Here is some first hand market research from Japan. In Akihabara, which is the big electronic shopping area in Tokyo, there were Iridium handsets on sale, seen and held today. Two Kyocera models, the SS-66K is 396,000 yen, the SD-66K is 370,000 yen. Interestingly the cheaper is dual mode, and the more expensive is satellite only?!. Then there is the Motorola, which they didn't have on display, that costs 432,000yen!
My reporter asked how many they have sold, and the answer was 2! They have been available since the beginning of January, and stock is there.... all you have to do is pull out the cash. The pricing plans are VERY confusing (for minutes), and vary from $1.64 a minute to $8.00. Interestingly, the minutes are priced in dollars, not yen. That's the first time my reporter has ever seen that in Japan. He has all the brochures for show and tell in a week.
Since the Kyocera models have been reported as only just becoming available, perhaps only the Motorola model was available since January. In any event, in Akihabara, the problem with Iridium is not a shortage of handsets, it's a shortage of customers.
At US$3500 for the Motorola it is not surpising that they are not selling that quickly.
Will Iridium fail? Originally, I thought that in light of Globalstar's incipient launch, Iridium would pull the plug even though it was 1996 and they were nearly ready to launch because they'd be uncompetitive. They went ahead and launched, so the network will be used because their marginal costs of a minute are near zero. It's just a question of at what price those minutes will sell. Another question is will the present shareholders make any money or will the debt result in a Eurotunnel type transfer of the assets to the creditors who will collect the revenue? Eurotunnel was a silly idea from the beginning and seemed to me a good idea for contractors and banks to make a lot of money at shareholder expense. Iridium has some elements of that process.
But before giving up on Iridium, how much a minute do Iridium really need from the system? Even if they only sell 2 billion minutes a year at 50c per minute, they collect $1bn per year. Which is not the end of the world. Suppose they sell minutes at 20c per minute, they'll get big demand. They would sell all their minutes at that price. Which would give them - now I can't remember how many minutes they have available - but it would still give them a couple of billion $$.
I don't see a disaster yet. Sure, it wouldn't be a huge get rich quick scheme, but the return on capital would still be pretty decent.
How many minutes do they have?
Meanwhile, Motorola and Kyocera will make big profits on those handsets, so they can cut their prices a bit if demand is slow even at 20c or 50c per minute. The Y2K stuff sounds like nonsense. There isn't going to be any Y2K disaster [my bet anyway] and if there are some problems, it isn't going to do much for Iridium.
Maybe Iridium want to wind prices down slowly rather than just panic into a price collapse while they are still upgrading software, getting the system humming and seeing how the prospects and customers react to the system and prices. It makes sense to start high and work their way down - as long as they don't take too long doing it.
So, anyone know the minutes available from Iridium [to save a lazy guy from going hunting]?
Jack, it might be best not to just panic and sell.
Maurice
PS: How about those great new chips coming out of IBM which will put major processing power in a Globalstar handset so that constellation 2 or 3 will be able to provide WWeb access? Things just go on getting better for Gloatalstar. [Just a little joke Jack] Thanks Djane. |
