Incredible RedHerring writeup on I* (6/99 Top 50 Public Superstars!)
[Released on their website on 5/18/99. Didn't RedHerring pick G* in 1/99 as a Top 10 pick in very select company for stock price appreciation in 1999? Someone at RedHerring is just a little embarrassed at this point. It appears that it was written in 4/99 as it used 3/31 stock price dates. djane]
herring.com
Iridium World Communications
The definitive company in the undefined
satellite communications service industry. [Hello?]
www.iridium.com
When Iridium World
Communications (Nasdaq: IRID)
became the first of the satellite
communications service
companies to offer truly global
PCS in November, one race
ended and another began.
Iridium's substantial victory in
the first one -- its next-closest
competitor, Globalstar, does not
expect to offer service until late
this year -- will be an enormous
advantage in the second: the
satellite companies' race to
realize a return on their
investment.
Globalstar, ICO Global
Communications, Constellation
Communications, and Mobile
Communications Holdings all
intend to offer the same
remarkable service that Iridium
provides: the ability for subscribers
to use one phone and one phone
number anywhere in the world.
Since 1990, the five major
narrowband satellite service
companies have raised more than $9 billion to build
systems expected to cost at least $13.8 billion before
they are all operational.
Although the scale of these satellite service companies
is unprecedented, their economic strategies are similar
to those of any wireless startup: invest huge amounts of
capital to secure bandwidth and build infrastructure,
deploy a service targeted initially at high-end customers,
then expand to a broader audience as increased demand
reduces hardware and service costs. All the narrowband
satellite companies expect that revenues will come first
from global business travelers, and that eventually they
will migrate all the way down the consumer food chain to
countries with underdeveloped telecommunications
infrastructures. It will take Iridium and the other
companies years to recoup their infrastructure
investments (see chart).
So far, the astronomical costs of Iridium's
service -- almost $3,000 for the handset (which
has all the portability of a cattle prod), and a
$2.50 charge per minute of use in addition to a service
charge of $25 per month (for a service that, quite
remarkably, doesn't work indoors) -- combined with the
continuing international expansion of traditional cellular
companies (see our profiles of Airspan Communications,
Formus Communications, and the Vodafone Group,
pages 68, 84, and 170, respectively), have translated into
slower corporate sales than Iridium expected. Moreover,
the luster of the company's narrowband satellite
communications effort has faded as next-generation
broadband satellite communications companies -- like
Teledesic and Cyberstar, which plan to offer high-speed
data and Internet services--have captured the
imaginations of both consumers and analysts.
None of these challenges is unique to Iridium, and the
company has the distinct advantage of being able to
attack them long before its competition. By the time
Globalstar launches its service at the end of this year,
Iridium expects to have signed up more than 300,000
subscribers [Hello?] and to have released its streamlined,
second-generation handset. As long as Wall Street
continues to have faith in the company -- of the 15 Wall
Street analysts that cover Iridium, 12 have rated its stock
a Buy or higher -- Iridium will maintain its luxurious
market capitalization, which at our press time stood at
$305.4 million. [Hello?] And although demand for narrowband
satellite communications services may not meet initial
expectations, satellite industry watchers expect that it
will be large enough to support at least two companies.
Iridium will be one. [Hello?]
--Brian E. Taptich [Hey, Brian, I've got a Chunnel investment for ya...]
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