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Technology Stocks : IRID - Iridium World Communications IPO Announced! -- Ignore unavailable to you. Want to Upgrade?

To: ML who wrote (1100)	11/12/1998 8:03:00 AM
From: Jeff Vayda	Read Replies (1) \| Respond to of 2693

All: Nothing new but not great news either. IRIDIUM CELEBRATES DEBUT LAUNCH BUT MARKET REMAINS SKEPTICAL Since Iridium LLC [IRIDF] opened its global satellite phone service for business Nov. 1, customers around the world have been making and receiving calls from their offices in New York to partners in Japan. The system, which took $5 billion and 11 years to create, made its service available after a one-month delay. But service providers as well as analysts are wary of the new global giant-saying the system needs more time to work out the kinks before steady investments can be made in the product. Iridium satellite service is authorized in more than 120 countries and territories around the world, with more than 200 markets expected by year-end. But due to the need for further network testing, Japanese service provider Nippon Iridium said that it will not charge its customers a monthly fee ($70 per month in the U.S.) for the first six months of service. Nippon has only tested calls within Japan, and calls made internationally "cannot be fully confirmed" yet, said Nippon President Y. Yasuda. Iridium still expects that about 200,000 people will sign up for service by the end of this year. If that prediction holds true, there may be disappointed customers as Motorola Inc. [MOT] and Japan's Kyocera Corp. [KYO] are expected to produce only about 100,000 Iridium satellite telephones this year. The technology also comes at a high price-with phone costs at about $3,000 each. Phone calls cost about $1.27 to $2 per minute domestically and $2 to $7 per minute internationally. In addition to the need to lower the high cost of service, analysts say the company's success will rely on ready product supply and high performance levels early on. "Their network is not yet at a satisfactory level of performance," said Vijay Jayant, satellite analyst with Bear Stearns. Steven Solazzo of Toronto Dominion Securities said Iridium's service is "expensive" so "they're under pressure to either deliver total quality or at least keep people happy until they can do that." ...Iridium's Service Launch Spurs Merrill Lynch Upgrade, While Analysts Remain Wary Merrill Lynch is predicting Iridium will amass 40,000 subscribers by year-end, but cut its projections for subscriber gain in future years. A possible source of higher-than-expected subscriber gains could occur, however, due to the company's shifting emphasis to vertical markets from business travelers as it primary target market. Merrill Lynch is projecting that Iridium will total 380,000 satellite subscribers at year-end 1999 and 840,000 at the close of 2000. The stock price target is $64 by year end 1999, up from Iridium's closing price of $46.25 Tuesday (11/10), said Merrill Lynch satellite analyst Tom Watts. As a result, Watts raised his rating of Iridium to "accumulate" from "neutral." Iridium also remained a "buy" for Lehman Brothers analyst John Bensche, who is forecasting a 12-month target price of $76 per share on Iridium stock. Excitement about the company's Nov. 1 introduction of voice service is spurring investor interest, he added. But prices have slipped since the service launch, not only for Iridium but for Motorola and Kyocera as well. Iridium slipped to $47.125 at our deadline from $49 Nov. 2. Kyocera's high of $94.60 in August has dropped $46 at deadline. Analyst Robert Wilkes of Brown Brothers Harriman lowered his near-term rating on Motorola Tuesday (11/10) to "neutral" from "buy," as company shares fell $.8125 to $53.6875. Motorola is the first developer of the Iridium concept and holds the largest stake in Iridium at 20 percent. The company suffered large losses from the $5 billion venture but forecasts a "significant contribution" to overall profits in 1999. CIBC Oppenheimer analyst Marc Crossman said these overall losses are due to Iridium's inability to launch full service Nov. 1. Iridium postponed its paging service until Nov. 15. Motorola and Kyocera have also been late delivering handsets to customers causing a negative impact on prices, he said. "November 1 was not the big grand opening for Iridium because they didn't load as many customers onto their system as possible," Crossman said. "The service launch was basically a move to continue beta testing. My guess is that (Iridium) won't be fully up and running until the end of the year, which will clearly create a drag (in the market) if the pioneer of the industry is (falling behind)." Iridium other stock holders include Sprint Corp. (FON), Raytheon Co. (RTN), Lockheed Martin Corp. (LMT) and Pacific Electric Wire & Cable Co. ...Launch of Commercial Service Wins Applause From Teledesic Founder McCaw On a positive note, Teledesic LLC praised the commercial launch of Iridium's global satellite-based wireless phone service. "Iridium and its prime contractor, Motorola, have accomplished a technical feat that's truly amazing," said Teledesic Chairman Craig McCaw, adding that Motorola also is Teledesic's prime contractor. Motorola became Teledesic's prime contractor last May when it announced plans to invest $750 million in cash and assets in Teledesic. Matra Marconi Space, Europe's leading satellite manufacturer, and The Boeing Company [BA], are Teledesic's other founding industrial team members. Teledesic's global service is targeted to begin in 2003.