IP: Stealing Iridium

[David Farber <dave () farber net>]

> From: "Janos Gereben" <janos451 () earthlink net>
> To: "jg" <janos451 () earthlink net>
> Subject: Stealing Iridium
> Date: Mon, 6 Aug 2001 08:31:32 -0700
> X-Mailer: Microsoft Outlook Express 5.50.4522.1200
>
> Iridium is staying alive
> by James Mathewson / ComputerUser.com
>
> Regular readers have followed the Iridium saga with us since
> Motorola--the company's parent--defaulted on $7 billion
> worth of debt, leaving the satellite data company in grave
> peril and $6 billion worth of low-earth-orbit satellites in
> danger of flame-out. Last we updated you, a veteran
> entrepreneur--former UNC CEO Dan Colussy--had purchased the
> assets of the company for a paltry $25 million, of which
> $6.5 million was cash. I thought this was an incredible
> deal, getting the infrastructure for a global anytime,
> anywhere voice and data network for pennies on the dollar.
> There were challenges ahead, but none of them seemed
> insurmountable, especially since he did not need to assume
> the company's massive debt load.
>
> His first action was to hire Boeing to fly the 66 birds.
> According to a story in the August issue of Wired magazine
> (which I can't link to because it's not online), this cut
> the company's burn rate from $80 million to $7 million per
> month. Then he signed the Department of Defense up to a $72
> million annual contract, further closing the profit gap. All
> he needs to do now is sign up 40,000 customers world wide
> (outside of the U.S. government) and he'll reach
> profitability. That shouldn't be too hard considering that
> the company had 27,000 customers when he bought it, leaving
> only 13,000 sales calls to make.
>
> Still, there are enough drawbacks to the current setup that
> it may be hard to sign up .0006 percent of the world's
> population (.0002 percent assuming most of the regular
> customers sign back up). The first of these is the cost of
> using the service. The price of the service under Motorola's
> leadership was an order of magnitude higher than
> conventional cell prices. This meant only commercial fishing
> and shipping services and the super rich could justify the
> cost. Hence it only had 27,000 customers. Colussy has
> already dropped the price to $1.50 per minute. This will
> make it much easier to sign up new customers.
>
> The second challenge is the handsets themselves. For some
> strange reason, the Motorola handset used to make calls
> and data links is half the size of a laptop. This is about
> a quarter of the size of a typical geosynchronous sat phone.
> But these low-earth-orbit birds are several times easier to
> connect to than geosynchronous satellites because they fly
> so much closer to users and are far more numerous. So you
> would think they could make a handset that is only slightly
> larger than current cell phones. The reason they hadn't was
> because it took so long to develop and launch all the
> satellites. By the time the birds were in the air, Motorola
> could not invest anything in the company and customers were
> forced to use 1980s handset technology. A new handset is
> under development that will easily hang off the belt, if not
> fit in the shirt pocket. It should be released this fall.
>
> There are other technical challenges with data standards and
> such, but given the aggressive nature in which Colussy has
> solved the more pressing problems facing the company, I
> don't expect these to stand in the way. I expect the company
> to achieve profitability by the end of the year (just a year
> after acquisition). And once it is profitable, look out. No
> other company has this kind of pervasive infrastructure. It
> could possibly take the mobile communications market by
> storm. Considering the initial investment,
> Iridium was a steal.
>
>
> ~~~~~~~~~~~~~~~~
> Janos Gereben/SF
> janos451 () earthlink net



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