WSJ. Iridium LLC's Chief Executive Quits Abruptly Amid Disarray
April 23, 1999
By DAVID P. HAMILTON
Staff Reporter of THE WALL STREET JOURNAL
The chief executive of Iridium LLC, Edward Staiano, resigned abruptly in
a spat with board members of the global satellite-phone pioneer,
underscoring the difficulties that have plagued the ambitious but troubled
service.
An Iridium spokeswoman said Mr. Staiano resigned due to "differences of
opinion between the board and himself," and declined to comment further
on those differences. Mr. Staiano wasn't available for comment. But the
hard-charging Mr. Staiano, who won plaudits for overseeing the successful
construction of the 66 satellite network that allows Iridium's customers to
make phone calls from just about anywhere on Earth, appears to have run
afoul of an entirely different set of challenges: successfully marketing and
distributing the service to high-end customers willing to pay high fees for
global service.
Tough Getting Customers
Iridium, while an impressive technical achievement, has had little luck
signing up customers, partly because it relegated marketing and distribution
to 16 overseas partners, many of whom haven't been up to the task. The
setback has gotten the company in hot water with its banks. While its
service started up on Nov. 1, Iridium missed its first-quarter target of
52,000 customers by a wide margin and failed to meet related financial
benchmarks. It risked technical default with its lenders until it won an
extension on covenants related to $800 million in secured loans.
Those financial problems played a role in the late March resignation of
Iridium's chief financial officer, Roy Grant. Analysts said Mr. Grant's
departure may have merely foreshadowed the resignation of Mr. Staiano
himself.
"The company's credibility had suffered a lot," said John Bensche, an
analyst with Lehman Brothers. "The board was saying, we've got to
renegotiate lines of credit and raise more money, so let's bring in a new
team."
Plagued by Difficulties
While Mr. Staiano may have been exactly the executive Iridium needed to
build its satellite system, he never seemed to get a handle on the company's
marketing and distribution problems. A $180 million global advertising
campaign last summer was rolled out months before the service was even
available, diluting its effect. The service has also been plagued by other
difficulties, including slow rollouts of handsets by Motorola Inc. and
Kyocera Corp. of Japan, two of Iridium's investors.
"The system now works," said Timothy O'Neil, an analyst with
SoundView Technology Group. "The next phase is getting sales and
marketing under control, and that's not Ed's expertise."
Among other things, Mr. Staiano never appointed a chief operating officer
who could have kept closer tabs on Iridium's relations with its overseas
partners, or "gateways." While Iridium's gateways were operational as of
Jan. 1, many of them didn't start selling Iridium handsets in their territories
until months later. In addition, analysts such as Mr. O'Neil criticize
Iridium's global image campaign and argue the company needs to focus
more intently on specific markets, such as governments, maritime and
aeronautical industries, and natural resource extraction.
A Call for 'New Blood'
Iridium named John Richardson, currently head of Iridium Africa, as
interim CEO, and formed an executive committee to find a permanent
replacement for Mr. Staiano. Prior to working for Iridium, Mr. Richardson
was chairman and CEO of Barclays Bank-BZW Asia, and before that
was an executive director for 12 years with Hutchison Whampoa Ltd., a
Hong Kong conglomerate with substantial interests in wireless
communications. Mr. Richardson's financial background will be key to
Iridium's financial negotiations, its most immediate challenge.
"Basically, the board decided new blood was needed at the top to make
sure Iridium will be a success," Iridium Chairman Robert Kinzie said.
"They were not satisfied with the progress the company is making, and
decided new leadership is needed to move forward."
Class A shares of Iridium World Communications Ltd., a stock that tracks
Iridium LLC, fell $1.5625, or 8.4%, to close at $17.0625 in Nasdaq
Stock Market trading.
Return to top of page | Format for printing
Copyright © 1999 Dow Jones & Company, Inc. All Rights Reserved.
|
