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

To: RMiethe who wrote (4640)	5/16/1999 7:03:00 PM
From: Goodboy	Read Replies (3) \| Respond to of 29987

Corporate America has seen many over hyped expectation filled white elephants before and they will see them again. Iridium was one of them. Everyone so caught up in the technology and the promises, they forgot to test the market's need and willingness to pay Iridium's predicted hand set and per minute rates. You can't always blame an over enthusiastic analyst whose firm is making big bucks off bond and stock offerings. After all, they are just singing the party line and Wall Street has worked this way before I started on the Street and I assume it will be that way until I leave. Remember the Stratosphere in Las Vegas. Luxary Casino, 120 stories high, roller coaster around the outside and a Mach 1 launch ride at the top called the Big Shot. All the financeers and analysts forgot one thing. The casino was in a part of Las Vegas that is deserted and far away from both the strip and the other "mega" casino attractions. The assumption was "if we build it, they will come". Iridium, like the Stratosphere found out that it just doesn't work that way. It's all about location, price and service (performance), no matter what business your in. If someone came to the realization that the market would not pay a price to justify the cost of the system ($5 billion plus), it might never have been built and it certianly wouldn't have been financed (lots of BS hype was needed to raise 5 big ones). Iridium did many things to cut costs during the planning stages. If their estimates were not extremely bullish and the cost savings not what they were, there would have been no deal. Motorola's equity investment in Iridium is worth about $200 million or so at Friday's closing price. Motorola has a total exposure of close to $1.5 billion between their deferred O&M contract, vendor financing and outstanding or obligated bank debt guarantees. If more money needs to be put up, Motorola will have to do it. If the price of the phones needs to be cut, Motorola will suffer profit margin erosion. If the O&M contract price is deemed too high, Motorola will have to lower it, thus eroding their profits further. But Motorola will have to do all these things to avoid having Iridium become a total loss and their overall exposure of $1.5 billion coming back and wacking their current shareholders. What you can bet on is that if they are asked to do all of these things, they will be the majority owner of the new equity and the debt load will be decreased accordingly. It is doubtful that any major company would commit to a large multi-year contract with Iridium during this uncertainty and turmoil. As we just saw, they were unable to find and outside CFO and were forced to promote from within. I think that same fate will materialize for the CEO position unless the new man is a workout or reorg specialist. Under the current finacial structure, marketing plan and pricing, Iridium will continue to fail. Motorola can't afford to expose its shareholders to this financial calamity, since the "do nothing" option will trigger further equity investment (obligated) and bank debt guarantees (obligated). On the other hand, Motorola can't just pony up their shareholders money as part of a reorg, cut their margins on the phones and O&M contract and not get something significant in return. I think it will be between 35 to 50 percent of the new Iridium common and all kinds of warrents will be issued to bondholders in return for their debt forgiveness. Strategic investors may get some warrants, but beyond that they will be wiped out beyond that. For your benefit, I will refrain from talking about the coming and already existent technology based problems with the Iridium system. I will do this because at this point, the theories are hypothetical. When the problems do actually materialize, I will assume they will be an allowed topic on the thread and will likely be of value. As for Globalstar, I think the stock is going back down. There will be lots of anxiety as Iridium equity heads to zero, Ico and other seek out scarce financings and investors sweat out the success of the next launches. If their commerical launch actually happens on time, there are still many things that can go wrong, at least perception wise. If it turns out the service is popular and in demand by Vodaphone and others customers, there could be a phone shortage or other excess demand issues (AT&T Wireless is being sued here in NY because their one rate digital calling plan is so popular, the system can't handle the usage and the result is horrendous reliablity). If it turns out that initial demand is weak or otherwise unimpressive, the media and investors will start screaming its another Iridium. The chances of everything going smoothly between now and then in my opinion are zero, thus the risk in the stock above $20 is too high. I will buy and buy heavy when the stock falls back into at least the low teens or single digits (I am not rooting for this, I just think it is all but certain). Of course, the bonds might be yeilding more than they are today and might make a great play in combination with the equity. I do have one question for the thread if anyone can answer it. How does the fact that Iridium is a Bermuda corporation impact a bankruptcy or other litigation?

To: RMiethe who wrote (4640)	5/16/1999 11:56:00 PM
From: JGoren	Respond to of 29987

I saw a talk by Bloomberg on TV last night. He was asked whether Bloomberg would do an IPO. He replied no. He said there are three reasons companies do IPO's. First, when the founder is ready to cash out, retire. Second, when the company needs money from the public to get its product or service to market, to grow, or needs PR to grow. And, third, when the promoters want to get some money out before the company craters. As to the latter he noted the internets, many of which do not have decent business plans and will never make money. None of those three situations applies to Bloomberg.