More I* shareholders' meeting notes (via MotleyFool thread)
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Stocks I / Iridium World Comm. Ltd. (IRID)
Subject: Notes from the shareholders' meeting
Date: 5/18/99 4:10 PM
Author: bi3ll
Number: of 610
Dear All-
In the interest of self-preservation, I took time off this morning to attend the
Iridium shareholders' meeting in Washington DC. The meeting was just over 2
hours in length, and I must say, I was VERY impressed with the new CEO.
Following is a transcription from the Q&A period. Please note that I am working
off of my own scribbled notes, and that I in no way claim to be quoting
accurately or exactly.
John Richardson, recently elected as a director and Interim CEO, made a
presentation based upon where he intends to take Iridium. He has been with the
company for two weeks, in which time he has focused upon righting the ship and
figuring out what has gone wrong. He is a no-nonsense Australian with a sense
of candor I look for in a CEO.
Mr. Richardson called the advertising and marketing efforts of Iridium to date
"arrogant, ineffective, and unresponsive to their potential market." The marketing
department has done a horrible job in identifying the key potential customers,
and has not been able to follow up upon leads.
Mr. Richardson believes that Iridium launched its commercial service "too soon",
and that it was a grave mistake to do this before the product was ready. He has
had the opportunity now to use Iridium services in such places as Nepal and the
Maldives, and says that it works great from a technology standpoint. To this
end, Iridium has succeeded in the hard part- they took a untested technological
model and implemented it. Where the previous management failed was in the
proper marketing. Mr. Richardson refused to implicate Ed Staiano for being
"incompetent", but said that he was improperly prepared for the business aspects
of the company, and that Iridium failed tunder his management to cultivate their
customer base, expecting the technology to do it for them. When a company
fails on this level, you have to look at the general, but Mr. Richardson says that
he will do everything in his power to ensure that the employees identified as
critical to success will be retained. This, IMHO, is a very good sign.
Following are the important questions asked to the Iridium executives, and the
answers. Unless otherwise noted, assume the person replying is Mr. Richardson,
as he ran the show today.
Q. Defense Departments worldwide want Iridium service. But it has to work.
Why did we not heear more about the DoD contract for 200 million dollars?
A. After the technical problems and marketing disaster we have seen, I did not
think that trumpeting such news would be received well. I think that Iridium was
launched too soon, before it was ready. Now we have products which are not
100% in the market, and we have an image of a company with poor service.
The Kyocera phones have had antenna problems, and yet some were shipped
last month. I will not have any other Iridium products go to market before it is
ready. We and Kyoceraare confident that they will be ready to re-ship their dual
mode phone in 1 month. We must also manage peoples expectations for how
the phone will work. It is a line of sight product. It will not work well in New
York City, and it is not designed to. Iridium's marketing implied that the phones
can be used anywhere. This is just not true, but with proper expectations people
will see what a valuable service we have to offer. The US Army uses it, and the
Navy has lauded the service. We are talking with other military organizations.
Prior marketing of Iridium was arrogant. This company threw its product at the
market before it was ready. Clearly this is one such market that has not properly
been addressed yet.
However, Iridium has a working service. We have achieved the hard part. Our
potential competitors are years behind. This is still a great benefit to this
company.
Q. What about the class action suits? If they win what happens?
If they win, they would get money from the company. However, these suits are
of nuisance value only. We believe them to be without merit, and thus you see
the pack mentality of those bringing about the suits.
Q. The current shareholders are worried about dilution of our value through a
conversion of debt to equity in a reorganization.
(Resp. by Leo Mondale, new CFO)- I have most of my net worth in this
company, the management, as shareholders are in the same position as you.
Fellow equity holders are integral to our constellation and own our distribution as
well as operating licenses. Iridium is dependent upon its equityholders, and thus
we have the exact same concerns as you.
Q. What happens if company needs to replace satellites? Why have people said
that it does not work well.
(Bruce ???, director of Telemetry responded) Iridium's constellation has been
stable since inception. It has in fact been more stable than some of the terrestrial
networks we interconnect with. We do not intend to allow holes to form in our
coverage.
(Mr. Richardson) Although this is the metric that is pointed out most often, I
look toward total minutes as the financial potential of the company. If we have
an Iridium phone in the hands of bunches of people who do not use it we are no
better off. I look to the 1.2 billion potential minutes that the system can handle.
Our bringing on these minutes is more important than number of subscribers.
In terms of the press reports, we had a situation where our German marketers
went to Albania and said phones worked great. Then they left without properly
instructing people on how to use phone, in a region where there is certainly
high-frequency jamming by one or both sides, and we have al lof the ingredients
for another PR disaster on our hands. This should not have been done.
Q. Why were the handsets not ready at rollout? Iridium had 10 years to get
ready. you should focus on what is simple. Everyone I know has pagers, and all
of the ones who travel shave problems with them not working. Why doesn't
Iridium focus on this market? You are holding the answer to their problem.
I think shareholders should have an opportunity to test these phones in some
capacity. Iridium MUST do a better job of educating its market. The company
launched too soon, without a common sense approach to marketing. Shoot us if
we make these common sense mistakes again. I will not tolerate a defective
product. All new products are on hold until we get these right, from all
perspectives. I think that the pagers are a perfect complement to the phones,
because most people say that their experience with the Iridium phone is much
better on the outgoing side than for receiving incoming calls.
Q. Why should I keep my stock?
It is not a pretty situation. The introduction of service was a disaster. I am
meeting with the banks this week and Motorola on Friday to lay out my
approach. I'd say all of the downside is currently built into the share price, but
you must decide for yourself. I would not have come if I thought there was not
potential here. I am working for free right now, and I am looking not to improve
the service, but to "relaunch" Iridiums core offerings, in a way that is consistent
with the capabilities of our product.
Q. It was announced last month the the Kyocera phones were released. Now I
hear they won't be out for 1 month. Which is it?
Kyocera phones were shipped, but are defective. I'm telling you as it is. I will
not ship Kyocera or any other phones until they are working properly.
Q. What is the status of the Sprint JV? The Claricom acquisition?
These things are in progress. We are 2-3 weeks away of completing the Sprint
venture. As for Claricom, it is in progress, but at Iridium's curretn financial
standing we are not at the most advantageuos bargaining point. We are
discussing terms with AT&T to complete the deal.
Q. If the minutes are the thing, why don't you give the phones away?
I am meeting with Motorola this Friday to see what we can do about the unit
price. We are looking also to move to a phone subsidy bases on a minimum
minute contract. Easy to do here in US, not so simple overseas.
Q. Most of the old management is still in place. What makes you think that they
wont fail again?
When there is a failure in battle you must always first look to the general.
Whenever I have seen Iridium employees over the last year, they have always
looked haggard. I think they were given unrealistic time frames, and now here
we are as a result. But, the system works and that is 90% of the battle. The
other 10% was a resounding failure. The previous marketing director was
dramatically overpaid for the work product we received. I will do as much as
possible to ensure that the critical, good employees stay in place. Their options
and incentives are under water as well.
I will not economize by allowing holes in service or holes in our technical team.
We are working this week to restructure bank facilities, improve the short term
balance sheet, discuss marketing options with the equipment suppliers and
prepare for a re-launch of the service. The changes we make will dramatically
alter the view of Iridium in the marketplace, and will be responsive to our
potential customer base.
NOTE: These comments were made in a very even keeled way, not defensive
nor in a cheerleader type of way. I went to this meeting thinking that my
impressions would dictate whether I kept the stock or not. I am now going to
buy additional shares and wait it out.
Take care all-
BillM
"Save the neck for me, Clark"
-Cousin Eddie |
