Hello Again

Dec. 21, 2004
Iridium Satellite resurrects satellite communications system and seeks success with tighter focus.

If you thought the demise of Iridium LLC in 2000 spelled the end of the world's first global wireless communications system, you were wrong. The original consortium that launched the $5 billion telecommunications system, which included a constellation of 66 satellites, may have buckled under an unforgiving debt load and overzealous growth projections, but a new company emerged to pick up the pieces. Less than four months after purchasing the assets of the bankrupt Iridium for the bargain-basement sum of $25 million in December 2000, Iridium Satellite LLC relaunched the commercial satellite communications services. The new company, based in Arlington, Va., was formed by private investors and is not associated with the former business. Iridium Satellite President and CEO Gino Picasso quickly ticks off numerous differentiators he believes give the new company a much greater chance of success than the former entity. Primary among those is that Iridium Satellite is built on a significantly lower cost structure and has a more focused business plan. Additionally, he notes, "We have no debt." Iridium Satellite says it operates at 10% of the former company's costs. It outsources operation of the constellation to Boeing Co. and has two gateway operations centers versus the 12 of the previous company. A third is owned by the U.S. Department of Defense, which signed a $72 million contract with Iridium Satellite in December 2000. Furthermore, Picasso believes the former company underestimated the lifespan of the satellite constellation, the replacement costs of which had been factored into its costs. The new company eschews the mass consumer market targeted by its predecessor. Instead it targets its offerings -- which include voice, paging and data services -- at companies with workers in remote field locations and other locales where telephone service is not available or is unreliable. The company's service, Picasso says, reaches every corner of the earth, "pole to pole." And it's relatively inexpensive, he notes, at about $1 to $1.50 per minute. Addressing criticism that the previous Iridium handsets were cumbersome to use, Picasso says they have come down in size. But don't expect a device the size of a cellular phone. "That's not what they are designed to replace," he says. "If you can be content with a cell phone, and it works wherever you need it, you don't need [us]." The ideal user, he says, "is a [remote] field office or field worker, in a fixed location or, more likely, mobile." What is not so different about Iridium Satellite and the previous company is the name. "We decided to stick with the [Iridium] name with a slight variation," Picasso explains, because "the Iridium name has great recognition." "People wanted to hear the story. That, for the first year, helped us open many doors." Picasso says the company's initial financial goals included reaching the break-even point in mid-2002. Instead the company has decided to reinvest some of its revenues to develop new business -- including short-burst messaging -- and has moved its break-even goal to mid-2003. "Technology when it makes economic sense has the opportunity to make change happen," Picasso says. "Iridium has the opportunity to effect profound change."

About the Author

Jill Jusko

Bio: Jill Jusko is executive editor for IndustryWeek. She has been writing about manufacturing operations leadership for more than 20 years. Her coverage spotlights companies that are in pursuit of world-class results in quality, productivity, cost and other benchmarks by implementing the latest continuous improvement and lean/Six-Sigma strategies. Jill also coordinates IndustryWeek’s Best Plants Awards Program, which annually salutes the leading manufacturing facilities in North America.

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