Relaunching Iridium. Satellite Phone Company to Focus on Customer
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Placing a call with the Iridium system is
easy for the user, but there's a lot
happening behind the scenes. (Marco
Doelling, Sarah Woodson/ABCNEWS.com)
By Michael J. Martinez
ABCNEWS.com
April 26 — Many new high-tech companies are
guilty of producing “vaporware” — software
that yet doesn't exist, except in the minds of the
marketing department. Iridium LLC, the first
global satellite telephone company, did exactly
the opposite.
The company,
backed by such
luminaries as Motorola
and Sprint, managed to
design, finance and
launch a constellation
of 66 satellites into
low-Earth orbit in just
seven years. Today, its
partners are producing
compact satellite
phones to take
advantage of the $1
billion system.
In theory, it should be child's play to sell the service
around the globe, especially when the technology and
infrastructure are already in place. But since the Iridium
system went online on Nov. 1, 1998, only 10,294
subscribers have signed up. That's far fewer than required
by the banks, which are starting to get impatient with the
company.
Today, Iridium announced that it has lost $505 million
in the last three months alone. A year ago, when the
company had no customers and was still launching
satellites, it was in the hole for only $205 million. Sales for
the first quarter of 1999 totaled only $1.45 million. CEO
Edward Staiano was ousted last week, and chief financial
officer Roy Grant is leaving at the end of the month.
How could a company with the right backers, the right
technology and all the financing it could ever need, end up
like this?
Selling Satellite Service
“Their initial business plan was always about getting the
infrastructure in place. They always assumed that it would
sell itself,” says Andrew Cole, telecommunications analyst
at Boston-based Renaissance Worldwide, Inc. “From a
technical perspective, they did as expected, but that's
about it.”
Indeed, everything — including Iridium's stock price,
which fell to just over 14 after an all-time high of 72 last
year — went downhill after the satellite system was
completed last fall. Japanese manufacturer Kyocera, one
of the two companies tapped to build phones for Iridium,
was late getting its products to market, leaving Motorola,
the other manufacturer, to do the work of two companies.
The manufacturing problems also left Iridium's retail
partners without anything to sell.
“Unfortunately, it takes a while for our partners to get
these phones through the distribution channels,” says
Craig Bond, Iridium's vice president of marketing.
“We've been working hard to clear that up.”
Where Was Marketing?
And, according to Bond, the company has also failed to
get those retail partners ready to promote the product.
“We have not done a very good job of providing our
service providers with the proper equipment and
information,” he admits.
Analyst Cole sees those problems as part of a
fundamental lack of marketing savvy on the part of
Iridium's management team.
“(Senior managers) were just from a different time,”
Cole says. “Their business plan would've been great 10
or 15 years ago, but not today. They have great people in
other positions, but never paid attention to the marketing.”
Iridium has since taken steps to solve that problem,
including the dismissal of Staiano. Instead of treating
Iridium as simply a holding company for the satellite
technology, executives have started emphasizing customer
contact and support. Company officials are also now
stressing the use of Iridium technology in places like
Kosovo, where journalists and refugees have been using
the company's phones to maintain contact with the rest of
the world.
“Until recently, we've taken a hands-off approach, but
I think you'll see that changing,” Bond says. “We're
looking at everything to be sure we're getting this
technology out there.”
An Uncertain Future
Today's earnings report was worse than Wall Street
expected, though company officials were candid enough
with investors and the press to avoid another major stock
drop — the price actually went up three-eighths of a point
and closed at 16 3/8.
“We were very disappointed by our first-quarter
numbers,” says John Richardson, the former Iridium
Africa executive who is now serving as interim CEO.
“Clearly, we have a great deal of work to do to improve
our marketing, distribution and sales activities all over the
world.”
The company must also face a tough renegotiation with
financial institutions to extend its lines of credit — the
banks were expecting three times the number of
subscribers and nearly 30 times the revenue by now. And
by the end of the year, competing satellite service provider
GlobalStar will be ready to challenge Iridium.
But Cole says he believes Iridium will pull through,
especially since Staiano has left. Cole blames the former
CEO for neglecting the marketing and sales arms of the
company.
“On the business side, I always thought the leadership
was both naive and stubborn,” Cole says. “Now, they
need to find a customer-driven CEO who can take them
to the next level. They still have a solid product. I think
they can do it.”
For now, Iridium's investors and creditors are left
hoping he's right.
Search for more on:
S U M M A R Y
Iridium built
one of the
largest private
satellite
networks in the
world, and the
technology to
make global
telephones
accessible. But
the company
forgot one
thing:
marketing.
“Their initial
business plan
was always
about getting
the
infrastructure
in place. They
always
assumed that it
would sell
itself.”
Andrew Cole,
Renaissance Worldwide
Inc.
W E B L I N K
Iridium
“We have not
done a very
good job of
providing our
service
providers with
the proper
equipment and
information.”
Craig Bond, Iridium LLC
Copyright ©1999 ABC News Internet Ventures.
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