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To: w molloy who wrote (28158)	4/23/1999 7:22:00 AM
From: Jon Koplik	Read Replies (1) \| Respond to of 152472

WSJ article on Iridium chief's abrupt resignation. April 23, 1999 Iridium LLC's Chief Executive Quits Abruptly Amid Disarray By DAVID P. HAMILTON Staff Reporter of THE WALL STREET JOURNAL The chief executive of Iridium LLC, Edward Staiano, resigned abruptly in a spat with board members of the global satellite-phone pioneer, underscoring the difficulties that have plagued the ambitious but troubled service. An Iridium spokeswoman said Mr. Staiano resigned due to "differences of opinion between the board and himself," and declined to comment further on those differences. Mr. Staiano wasn't available for comment. But the hard-charging Mr. Staiano, who won plaudits for overseeing the successful construction of the 66 satellite network that allows Iridium's customers to make phone calls from just about anywhere on Earth, appears to have run afoul of an entirely different set of challenges: successfully marketing and distributing the service to high-end customers willing to pay high fees for global service. Tough Getting Customers Iridium, while an impressive technical achievement, has had little luck signing up customers, partly because it relegated marketing and distribution to 16 overseas partners, many of whom haven't been up to the task. The setback has gotten the company in hot water with its banks. While its service started up on Nov. 1, Iridium missed its first-quarter target of 52,000 customers by a wide margin and failed to meet related financial benchmarks. It risked technical default with its lenders until it won an extension on covenants related to $800 million in secured loans. Those financial problems played a role in the late March resignation of Iridium's chief financial officer, Roy Grant. Analysts said Mr. Grant's departure may have merely foreshadowed the resignation of Mr. Staiano himself. "The company's credibility had suffered a lot," said John Bensche, an analyst with Lehman Brothers. "The board was saying, we've got to renegotiate lines of credit and raise more money, so let's bring in a new team." Plagued by Difficulties While Mr. Staiano may have been exactly the executive Iridium needed to build its satellite system, he never seemed to get a handle on the company's marketing and distribution problems. A $180 million global advertising campaign last summer was rolled out months before the service was even available, diluting its effect. The service has also been plagued by other difficulties, including slow rollouts of handsets by Motorola Inc. and Kyocera Corp. of Japan, two of Iridium's investors. "The system now works," said Timothy O'Neil, an analyst with SoundView Technology Group. "The next phase is getting sales and marketing under control, and that's not Ed's expertise." Among other things, Mr. Staiano never appointed a chief operating officer who could have kept closer tabs on Iridium's relations with its overseas partners, or "gateways." While Iridium's gateways were operational as of Jan. 1, many of them didn't start selling Iridium handsets in their territories until months later. In addition, analysts such as Mr. O'Neil criticize Iridium's global image campaign and argue the company needs to focus more intently on specific markets, such as governments, maritime and aeronautical industries, and natural resource extraction. A Call for 'New Blood' Iridium named John Richardson, currently head of Iridium Africa, as interim CEO, and formed an executive committee to find a permanent replacement for Mr. Staiano. Prior to working for Iridium, Mr. Richardson was chairman and CEO of Barclays Bank-BZW Asia, and before that was an executive director for 12 years with Hutchison Whampoa Ltd., a Hong Kong conglomerate with substantial interests in wireless communications. Mr. Richardson's financial background will be key to Iridium's financial negotiations, its most immediate challenge. "Basically, the board decided new blood was needed at the top to make sure Iridium will be a success," Iridium Chairman Robert Kinzie said. "They were not satisfied with the progress the company is making, and decided new leadership is needed to move forward." Class A shares of Iridium World Communications Ltd., a stock that tracks Iridium LLC, fell $1.5625, or 8.4%, to close at $17.0625 in Nasdaq Stock Market trading. Copyright © 1999 Dow Jones & Company, Inc. All Rights Reserved.