Valueman:
I know how personally you take the losses that, to date, have accrued to your clients. I too would much rather lose my own money than that of those to whom I have a fiduciary responsibility. But, as I have told you before, I believe angst, frustration and disappointment have colored your thinking.
CDMA's commercialization seemed like the Perils of Pauline. You know the mantra well: the bears argued that the technology wouldn't work, then that it would be too late to market, then that it wouldn't work well enough...so on and so forth. By remaining focused on the specific technological differentials, and accepting delays, technical setbacks and PR disasters as part of the program, we capitalized on what we knew all along...that CDMA was a paradigm changing technology. I once characterized Qualcomm’s story as a Grade B horror movie...we all knew the ultimate outcome, but were supposed to get scared along the way.
Viewed by somebody lacking your battle scars, Globalstar's path to commercialization looks reasonably smooth, with a number of predictably unpredictable setbacks along the way. I think I said as much to you when we spoke about Globalstar a while ago.
Despite the emotional context, the history is quite irrelevant. Whether, in your mind, Bernard overpromised and underdelivered, is irrelevant. The question is not about "what was" or what was "supposed to happened" but neatly distills down to "what is."
So "what is"? Like it or not, Globalstar is still in the process of going commercial. The act of turning on the network, in-and-of-itself, did not equate to a commercial enterprise. To use an electric utility metaphor, the power plant started running, the wires were connected to everybody's home, but people are still trying to figure out which devices are appropriate to plug into the wall.
The Street (and many shareholders) would like to see a heroic display of effort; a potentially grand and likely quixotic, marketing program with widespread print and television advertisement; an act of vanity similar to Iridium's. Such a problem would probably drive an incremental ten-to-twenty thousand North American subscribers in relatively short-order. Of course, the net present value would be forever negative after adjusting net customer acquisition expenses. Rather than opting for such grand displays, Bernard and our marketing partners have instead chosen to do the slow and steady heavy lifting that actually builds a business.
I have had in depth conversations with management at a number of Globalstar's key service provider partners. Their perspectives vis-a-vis the market opportunity and Globalstar's financial viability differ markedly from the Street's perception. For example, while Airtouch believes that there is a significant retail (read people like you and me) opportunity for GSTR's services in the U.S., there is a much bigger opportunity in the commercial, federal, state and local arena. Effective marketing to such constituencies cannot be accomplished running ads in the newspaper. Trials need to be done, specific applications need to be defined, contracts need to be negotiated, budgets need to get approved and THEN deployment happens. This takes take, and the process can only begin after the network is turned and is fully functional. As I suggested before, elephants takes a while to get moving, but once in motion, can accomplish much.
So...one can sit around bemoaning GSTR's 'paltry' 13,000 subscribers, complaining bitterly that the spreadsheet model called for 75,000 by June 26th...or one can go to the source and find out whether demand really exists or not. Again, as I suggested in my first post, the parallels between Airtouch's first CDMA deployment in Los Angeles and Globalstar's first halting steps toward commercialization are so closing that it’s scary.
Back in 1996, smart, competent, honest people at Airtouch told me the truth about LA at the same time that many pundits insisted on another reality. Today, I have discovered similar truths about Globalstar, coming from similar sources...within this context it's not overly hard to separate truth from emotion.
I am not a Pollyanna. Globalstar is risky, levered and dependent on, as of yet, unfunded external financing if operations are to continue much past March of next year. Heck if my research had stopped with the company's footnote disclosures, I'd be in the "short-it-to-zero" camp with the rest of the bears. The problem is, I didn't stop there. And after talking to the service providers, and grasping how significant Globalstar is to their marketing plans while, at the same time, noting how comparatively irrelevant an extra $100mm or so is to their balance sheets, I have concluded that the financing concerns are overstated.
I suspect that before year-end we will know whether I am right or wrong.
Best regards,
Gregg |
