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

To: Jeff Vayda who wrote (5480)	7/1/1999 10:33:00 AM
From: djane	Respond to of 29987

Hoover's Stock of the Day: Iridium LLC Corporation (via LOR yahoo thread) hoovers.com Last updated 7/01/99, 12:00 a.m. by Kathleen Kelly Yesterday satellite telephony provider Iridium received an 11th-hour pardon on $800 million in bank loans, but how much longer can it pretend it's not home when creditors come knocking at the door? A new service, even a truly innovative one, does not guarantee that consumers will flock to it with money. Iridium has learned this lesson $5 billion later -- the price tag on its 66 low-earth-orbit (LEO) satellite system. Even as July 15th interest payments loom, CEO John Richardson (who stepped in when Edward Staiano resigned) has sworn up and down that Iridium doesn't plan to file bankruptcy papers. Investors are perhaps a little doubtful: Stock prices dove from a high of $68 before its product launch to a low of $9 this year. So how will Iridium drum up the cash to keep its satellites aloft? Fire sale! Sort of. Iridium has announced that it will slash its service prices, down from about $7 to about $1.50 a minute in the US and $3 per minute overseas. In addition, Iridium phone manufacturers Motorola (Iridium's long-time supporter and investor) and Kyocera will cut prices for handsets to about $1,000. Iridium is also reevaluating its marketing strategy. More attention is being given to military, oil, and maritime businesses, which operate in remote areas and have the cash to spend on satellite phones. Salespeople from Telecom Italia and Sprint, both members of the Iridium consortium, have orders to begin pushing Iridium. Iridium's backers demanded 52,000 customers and $40 million in sales as of yesterday, June 30, following a two-month reprieve from a previous May 31 due date. Iridium couldn't make it. This just hasn't been its fiscal year: Iridium was forced to back out of an agreement made last December to buy an aeronautical communications company from AT&T and Rogers Cantel Mobile Communications, it laid off cubicle-loads of employees, and it lost first its CEO and then its CFO (Roy Grant, who followed Staiano's lead and resigned). How have the mighty fallen? When Iridium rolled out its service in November, the company offered the first global satellite system in the world. As a substitute for cellular, however, no one was buying. The company had identified a gap in the market, executed a means of fulfilling the need, but couldn't make the sale. By April only 10,000 subscribers had signed on. No one was buying because the international business traveler -- the original marketing target -- wouldn't spend the money on a handset that originally cost more than a month's rent for a chic Soho loft (and its clumsy size certainly made carrying it less stylish than toting a Nokia). In developing countries with little telecom infrastructure, regions where satellite telephony could be appealing, the prices are insurmountable. Technical problems with the system have only added to its unattractiveness. Though the Iridium phone may work for a man calling Chicago from the Congo, at home he may have trouble connecting through the walls of his Chicago office building. Even so, many analysts think Iridium can turn it around, if given enough time. But time is running out. Iridium is faced with the imminent prospect of competition from Globalstar and ICO Global Communications. Globalstar, a consortium headed by Loral Space & Communications (also an Iridium consortium member), is expected to launch service for its 32-satellite network in September, even though some of its Asian investors, such as Hyundai, have been distracted by the economic crisis. But Iridium's biggest challenge is yet to come: Its 66 LEOs have a shelf life of about five years, requiring that the network be replaced completely by 2003. Kathleen Kelly is an assistant editor on Hoover's Energy, Transportation, and Utilities team. Copyright © 1999, Hoover's, Inc. Austin, Texas