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Microcap & Penny Stocks : Globalstar Telecommunications Limited GSAT -- Ignore unavailable to you. Want to Upgrade?

To: djane who wrote (5310)	6/23/1999 11:22:00 AM
From: djane	Read Replies (1) \| Respond to of 29987

EETimes. Iridium revamps, but troubles linger By Margaret Quan EE Times (06/22/99, 12:39 p.m. EDT) WASHINGTON — In an effort to revive its struggling business in satellite-based communications services, Iridium LLC unveiled a revamped strategy on Monday (June 21) that included more affordable service and equipment pricing. Iridium executives said the new strategy repositions the company's services as a competitively priced telecommunications solution that will drive Iridium's sales worldwide. Satellite industry analysts said the strategy may help Iridium increase subscribers, but would do little to calm investor concerns about the company's lack of positive cash flow, capital structure or its ability to last until the end of the year. Effective July 1, international service rates for Iridium satellite phone service are expected to cost a flat $3 per minute, with local calls ranging from $1.50 to $2.50 per minute. Kyocera handset prices used for the service have also been reduced, with retail prices expected to go below $1,000. Motorola also plans to reduce prices for its entire portfolio of Satellite Series handsets, pagers and select accessories for the Iridium service. John Richardson, chief executive officer for Iridium, said the handset and service price reductions were made in response to customer requests. The reductions and Iridium's customer focus will help drive the company's revenue growth, he said. "These significant reductions have a short-term impact on our bottom line," he said. "However, we believe that the combination of attractive pricing and customer-driven service will ultimately help us to load the customers, and see the usage we need to make this business a financial success." In addition to price cuts, Iridium is rolling out creative service packages and specialty products tailored to specific market segments, including both the industrial and personal markets. Some of the specialty products include antennas for a variety of applications, solar chargers and portable docking stations for the phones, as well as cellular cassettes and pagers. As part of the announcement, Iridium said that Motorola will devote trained salespeople to sell Iridium services and Iridium system products in an effort to reach the important industrial markets. Motorola will have a direct sales force of 200 in the United States by the end of this month. Motorola has also engaged other product distribution teams around the world to assist gateways and service providers with the sale of Iridium services and Motorola Satellite Series products, Iridium said. In addition, Iridium is working with existing satellite service providers that currently sell to industrial customers. Analysts took a positive view of the moves, and said the the price reductions will make Iridium's prices roughly equal with those of the forthcoming satellite phone service of Globalstar. But the move did not address some basic concerns analysts have about Iridium's finances — whether it is going to file for bankruptcy, or be bailed out by Motorola, for example. "Basically Iridium is not a viable business today. It has no positive cash flow and no business or capital structure to make it through the year," said William Kidd, senior satellite industry analyst at investment firm C.E. Unterberg,Towbin (New York). Iridium continues to struggle to find funds and the right business plan to keep its operation going. Lenders have given the company until June 30 to increase its subscriber base to 27,000 and to have $4 million in cash reserves and $30 million in cumulative accrued revenues. The company reportedly has about 15,000 customers and had $1.45 million in first-quarter revenues. Iridium reportedly cut 15 percent of its staff of 550 in Washington earlier this month in an effort to cut costs. Analysts said the move was largely symbolic, and pointed out that Iridium's major burden is the operations and maintenance contract it has with Motorola. That contract costs Iridium $500 million a year. The contract was structured to cover risks Motorola took to build the satellite network and to guarantee that a satellite constellation would always be in place. But analyst Kidd said Iridium is overpaying for that contract by 70 percent, as the satellite system, once built, doesn't cost as much to maintain. Kidd said the overpayment is very significant considering the company's lack of positive cash flow. While there is still uncertainty over whether Motorola will bail out Iridium, Kidd suggested that Motorola's decision to devote 200 salespeople to Iridium implies that Motorola will support Iridium long-term. Iridium plans to unveil a restructuring by late June or early July. Some analysts believe July 15 will be the drop-dead deadline for the restructuring, since interest on senior notes is due on that day. Kidd said he is telling investors to avoid investing in Iridium until the restructuring is over and the company's long-term capitalization is assured.