WSJ. Motorola Sharply Cuts Role In Teledesic Satellite Project
May 26, 1999
By QUENTIN HARDY
Staff Reporter of THE WALL STREET JOURNAL
Motorola Inc. has sharply cut back its participation in Teledesic LLC, a $9
billion satellite-based "Internet in the sky" backed by telecommunications
magnate Craig McCaw and Microsoft Corp. Chairman Bill Gates.
While neither company said Motorola was completely off the project, the
move signals an unforeseen challenge at Motorola, which is struggling to
make a success of its Iridium satellite-communications project.
Teledesic and Motorola gave somewhat
different reasons for why Motorola,
Schaumburg, Ill., had pulled out many of its
600 engineers assigned to Teledesic, and told
several subcontractors to put their Teledesic
work on the back burner. Motorola said the engineers were reassigned to
projects that are likely to bring more immediate benefits than Teledesic, a
proposed network of 288 satellites scheduled to begin service in late
2003.
Meanwhile, Teledesic, based in Kirkland, Wash., said the engineers left at
its behest, so that Motorola could concentrate resources on Iridium.
Iridium, a 66-satellite project that took 10 years and $5 billion to get off
the ground, has been a huge disappointment since going commercial in
November. Motorola created the project and owns 18% of
Washington-based Iridium LLC, which is in renegotiation talks with its
bankers and bondholders.
Though both are large-scale satellite network projects, Iridium and
Teledesic have different markets. Iridium, which sells mobile phones and
pagers, is designed for voice and low transmission-rate data
communications. Teledesic intends to transfer data at very high rates to
fixed locations, such as remote offices or cities with a poor
telecommunications infrastructure.
Negotiations for a final contract to design and construct Teledesic are
already about six months behind schedule. Some outsiders viewed
Motorola's actions as a drag on contract progress, even as high-speed
data projects backed by Lockheed Martin Corp. and Hughes Electronics
Corp. appear to be gaining momentum.
"A lot of programs are revving up, and this one looks like it's slowing," said
Tim O'Neil, analyst at Soundview Financial Group. "Things aren't going the
way Motorola planned."
"We are working aggressively with Motorola to finalize" the contract, said
Bob Ratliffe, a Teledesic spokesman. "We understand Motorola's
immediate priority is that Iridium must perform up to expectations. We
have strongly encouraged Motorola in that effort and expect to benefit
from their experience with Iridium."
Motorola said some of the engineers from Teledesic were indeed working
on Iridium but denied that Iridium has become a preoccupation. "We have
deep resources of talent, and the ability to do both," said Motorola
spokesman Albert Brashear, who added that the cuts at Teledesic
amounted to "scaling back the work we were doing without contract."
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