Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Joe Brown who wrote (1461)	3/20/1999 10:27:00 AM
From: tero kuittinen	Read Replies (2) \| Respond to of 2693

I'm not sure it's only about marketing and execution. It looks like Motorola never made a serious attempt to find out what the actual target consumer group would be. The best marketing and execution don't produce results if there is no actual demand for the product. There apparently was no serious re-evaluation of Iridium project prompted by the unexpected explosion in digital phone network expansion and the big gains made in making these handsets small and inexpensive. The whole Iridium project implicitly assumed that digital handsets would remain big, clumsy and expensive, just the way they were in early Nineties. When the marketplace underwent a sea change, Iridium project just went on, despite the changed competitive environment. It was a measure of Motorola's self-confidence that they picked Kyocera as their handset partner. Apparently they did not want serious competition in selling Iridium handsets that a first class manufacturer like Sony or Matsushita might have provided. They got what they asked for. This looks somewhat like Motorola's paging business - the new two-way pagers are great, but paging as an industry has no future. It will be rendered obsolete by small, cheap phones that can do everything that pagers can do - and a lot more besides. Iridium is facing a tough situation. Either they introduce a new class of handsets that weigh 50% less and cost half as much to compete with Globalstar and land-based worldphones debuting next winter. Or they try to keep selling the current mammoths. Either option does not look too appetizing. Usually producing a new class of handsets that represent a big leap in miniaturization is very expensive - that's why Motorola is asking for a stiff premium for their new 83 gram GSM V3688 phones. How can they execute an expensive redesign of their current Iridium models while simultaneously slashing the price? It just doesn't add up. The only business sense Iridium made was the assumption that they would be able to sign up so many customers that they would have a big edge over Globalstar and worldphones before they arrived - this could have bankrolled big investments in new, more competitive handsets. That scenario now looks very unlikely. The word-of-mouth on Iridium here in Europe is lethal - people are saying that the phones can't cut through even tree foliage, much less roofs of cars and buildings. Which means that you have to sleep out in the open or keep your phone in your balcony to be able to receive calls. I don't know how much of this is true, because nobody I know has even tried the model. At CeBIT nobody talked about Iridium. I don't think another massive ad campaign will do much good. I guess the point is this - sometimes it makes sense to cut your losses and dump an investment that is starting to look iffy. At least you then get a chance to recoup the money in some other company. There is a chance of an Iridium rebound - but the risks now look a lot bigger than three months ago. I don't think Motorola can afford to pump much money in this project; they are already overextended in trying to keep iDEN alive, turning around their troubled mobile network division, figuring out what to do with paging, completing the CDMA handset strategy that is 12-16 months late, creating third generation digital phone technology, trying to overcome the 6 month lead their competition has in internet phones, etc. If Iridium was the major focus of Motorola, it might have a shot at a come-back. But Motorola has other commitments that can't take a backseat. Tero