Subject: Re: [NEXTEL-1] Remember those 'Iridium's going to fail' jokes? Prepare to eat your hat

From: Marcel <[email-masked]>
Date: Tue, 22 Apr 2003 03:23:55 -0400

Ok, I may have to stop calling it Iridabomb.
Can I borrow your hat?

Marcel wrote:

> Remember those 'Iridium's going to fail' jokes? Prepare to eat your hat
> Wed Apr 9, 6:00 AM ET
>
> Kevin Maney USA TODAY

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From: Marcel <[email-masked]>
Date: Tue, 22 Apr 2003 02:38:33 -0400

Kevin Maney USA TODAY

Seems like just yesterday I was worried about getting bonked on the head
by a piece of the defunct Iridium satellite phone system as it fell out of orbit.

But nobody ever got bonked, because Iridium
never fell. Instead, it made like Batman escaping
from a death contraption just after the
commercial break. Iridium avoided certain
satellite death two years ago and is becoming
one of the few success stories in
communications.

Now it's getting an added lift from the Iraq (news -
web sites) war. Thousands of U.S. soldiers and
international media correspondents are making
calls on Iridium phones from the Iraqi desert,
where there are no land lines or cell towers.

The phones connect to one of Iridium's 66
operating satellites and help members of the
military coordinate attacks, track supplies and
talk to their moms. Thanks in part to that boost,
Iridium will be operating in the black by year's
end.

''The system is performing a lot better than any of
the (new) investors expected it to,'' says CEO
Gino Picasso.

Iridium was Motorola's $5 billion mistake -- a
punch line for jokes about corporate goofs. It was
the Edsel of outer space. The Spruce Goose of communications. Iridium
was to Motorola what Ishtar was to Dustin Hoffman's movie career.

Set up by Motorola as a separate company, Iridium charged $7 a minute for
calls on handsets that cost $3,000. Takers were -- duh! -- few.

In spring 2000, Iridium filed for Chapter 11 bankruptcy protection. Nobody
bought it, so the company decided to let the system -- 66 satellites and
eight spares -- fall from orbit and burn up in the atmosphere.

Except that not all the pieces would burn. One odds maker figured there
was a 1 in 249 chance that at least one person would suffer a direct hit. The
whole escapade was such a parody of capitalism that it made giddy
headlines in China's People's Daily.

When the bankruptcy judge offered one last chance for a buyer to step in,
nobody could put together a deal that made all parties happy -- except for
Dan Colussy, who for the previous 10 years had run United Nuclear, a
company that refurbished aircraft and made nuclear reactors for submarines.
''Basically, he was retired but viewed it as a shameful waste to see an
extremely valuable asset done away with,'' says Picasso, who Colussy
hired to run Iridium.

So Colussy and a group of investors offered $25 million for a system that
cost Motorola and its partners $5 billion to build. That's one-half cent on the
dollar. It's like picking up a $150,000 Porsche 911 for $750. Or getting a
$425-a-night room at the Ritz-Carlton in Laguna Nigel, Calif., for $2.

The last time anybody consummated a deal like that, the French wound up
with just $15 million for the Louisiana Purchase, which is probably the
underlying reason they're ticked off at us.

In an odd twist, the new Iridium is 24% owned by an investment firm
controlled by Prince Khalid bin Abdullah bin Abdulrahman of Saudi Arabia.

The prince used to own a minority chunk of the old Iridium in partnership
with the Saudi Binladen Group, the company run by Osama bin Laden
(news - web sites)'s family. So in a way, some of the money that gave a
start to the world's most notorious terrorist partly funded a communications
system helping the U.S. military blast Saddam's army. Now that's
globalization.

Anyway, the new Iridium -- free of debt and operating at one-tenth the cost
of old Iridium -- could drastically cut prices and still turn a profit. Calls cost
$1.50 a minute. Handsets are in the $1,500 range and dropping. It's like
cellphone prices circa 1985.

The old Iridium needed 1 million users to break even. The new Iridium needs
tens of thousands. Iridium won't say how many customers it has, but the
military signed a deal for unlimited use for up to 20,000 soldiers, and the
British army is another customer.

The media in Iraq were already using hundreds of Iridium phones -- and are
now using more.

Last week, the military banned the press from using a rival satellite
phone from Thuraya Satellite Telecommunications because the Iraqis
might have been able to track its signal to figure out the location of U.S.
troops. Some reporters have turned to the more secure Iridium phones.

At this point, Colussy's deal is looking even better than it did at first.
Motorola had estimated that Iridium's satellites would sputter out in
2007. Picasso's team tinkered with the system and launched an additional
seven spares last year. It now believes the system will live until at least
2013.

Motorola has continued making the handsets, but that will end in June
and Iridium will market its own. Motorola will finally be done with the
ordeal. It will pass the last of its Iridium kidney stones.

Aside from being one of the best comebacks in tech, Iridium might offer
a lesson. A bunch of no-name, second-tier investors paid pocket change
for a huge, bankrupt communications system, then drastically dropped
prices and made it into a viable business.

Down the road, others could use the same recipe on a Global Crossing,
Qwest Communications, or any of the many telecom network companies
that are or will be in bankruptcy reorganization.

Once a joke, Iridium might turn out to be a leader.

http://story.news.yahoo.com/news?tmpl=story&u=/usatoday/20030409/tc_usatoday/5050903

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From: "Paul J Zawada" <[email-masked]>
Date: Tue, 22 Apr 2003 13:28:36 -0000

--- In [email-masked], Marcel <Marcelrf@B...> wrote:
> never fell. 
>...

Nobody got bonked?  Maybe not physically, but how about the shareholders of 
Motorola and it's partners?  What about the $4.975B that Motorola and its partners 
put into the network that they never recovered?   To say the Iridium project itself was 
a success is wrong.  Some savy investors may turn it around and make some money 
in the short term, but when they need start to pour money in it at the level Motorola 
had to, they'll llikely have to pull the plug on it...

--zawada

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