OPIM 5894 Advanced Project management

Iridium LLC
Team 3
Richard Buskey
Jonathan Weiss
Daniel Mahzonni
Prashant Mishra
Vijay Gadigeppa
Jonathan Koenig

Iridium LLC
What caused iridium to fail: was it a bad strategy, bad execution or bad
luck?
Bad Strategy
Marketing and Sales mistakes
Overpriced phones: $ 3,000
Prices: $3.00 - $7.50 per call
Mixed predictions regarding the mobile satellite market
Leslie Taylor Associates predicted a user base of 7 mill. subscribers
and revenues of $8 20 bill. by 2003
Forrester Research predicted that the global satellite market would
be as much as $36 bill. by 2005.
Very ambitious project
Iridium had signed 256 operating agreements with local providers in
over 100 countries by July 1999. The company still had to negotiate
agreements with another 140 countries and territories.

Iridium LLC
What caused iridium to fail: was it a bad strategy, bad execution or bad
luck?
Bad Strategy (Contd.)
Project Financing
Iridium LLC was a spin-off from Motorola
Assumption: Once project complete, would resemble a utility
company with high margins and steady cash flows
Not planned adequately for the entire project; no contingency plan
Need based financing vs requirements based financing

Iridium LLC
What caused iridium to fail: was it a bad strategy, bad execution or bad
luck?
Bad Execution
It failed to answer over 1 mill. sales inquires due to internal confusion and
experienced logistical problems trying to distribute phones
In March 1999, it was unable to fill 15,000 orders for satellite phones
because the manufacturer could not ramp up production fast enough.
Iridium announced that it had only 7,188 satellite subscribers, 10,294
total service subscribers and cumulative cash revenues of $195,000 as of
March 31 [Expected: 27,000 subscribers, 52,000 total service subscribers
and $4 mill. of cash revenues]
Non-aesthetic hand-sets
Advertising: Spent $180 mill. campaign

Iridium LLC
Why did Motorola finance Iridium with project debt rather than
corporate debt?
Liability: Motorola not liable/responsible for project debt
Lenders only have access to Iridiums cash flows; in turn safe-guarding
Motorolas books
To take advantage of government sponsorship
Risk concentration: Could not use corporate debt because of the narrow
scope; single source of revenue
The company was looked at being a potential cash cow; retain the control and
decision making within the company

Iridium LLC
What lessons regarding large, greenfield projects do you draw from this
case?
Test market; Limited roll-out; Focus group
Better understanding of the competition; over-estimation of the practicality of
the device and usage;
Wrong target market (should have targeted Dept. of Defense)
Thorough Market Analysis: Optimistic vs Pessimistic predictions; contingency
plans
Stakeholders and departments need to be in sync with the project objectives

Iridium LLC
Recent Update
Iridium Satellite LLC merged with a special purpose acquisition company
(GHQ) created by the investment bank GreenHill and Co(NYSE: GHL) in
September, 2009 to create Iridium Communications, Inc
The public company trades on NASDAQ under the symbol "IRDM
The company has approximately 447,000 subscribers as of the end of March,
2011 (compared to 320,000 in December, 2008)
Revenue for the full year 2010 was US $348.2 million with Operational EBITDA
of US $158.9 million.
Extensively used by the US Dept of Defense through the DoD gateway in
Hawaii..The DoD made up 23% of Iridium's revenues in 2010