| From the Editor
By Greg Thomason New Day, Different Paradigm
Flexibility is the key when bringing a business plan into the marketplace. Certainly investors want to believe in the vision projected in an outlined business plan, i.e., target markets, costs of production, and projected retail costs for your goods and services. But the reality of launching a new product or business dictates that the market you perceive today is likely not to be the market that greets you upon waking up tomorrow.
An excellent case study is the Iridium satellite communication constellation, headed up by Motorola Inc. First proposed in 1987, the $6.6 billion venture is due to begin providing service later this year. Since its inception, the global landscape in the telecommunications industry has changed significantly. Forcing this change is the rapid expansion of land-based cellular and fiber-optic networks. This aggressive expansion has brought the price of land-based cellular phone service down and made this service available to remote parts of the globe which in '87 were not served by cellular telecommunications.
This changing paradigm has, according to some industry analysts, detracted from Iridium's potential target market and called the success of the project in to question. Herschel Schosteck, a telecommunication analyst, is quoted in the Chicago Tribune as stating, "If all the revenue from international business travelers calling internationally from developing countries went to Iridium, Iridium would still not be able to cover its capital costs, let alone operating costs."
Hence, the new day that is greeting Iridium LLC and its constellation of 72 satellites (6 of which are back up satellites), is dictating change. Among the first business plan projections to be revisited is the cost of service. Initially projected at $3 per minute, recent reports place Iridium's call-per-minute rate at $1.91 per minute. At this rate, Iridium is counting on a fast start that will allow it to establish its service before competition enters the market. To aid this, Iridium has cut deals with 212 wireless phone companies in more than 100 countries. The corporation also plans on launching a $180 million global ad blitz designed to promote both the Iridium phone and pager services with global corporations.
To date, Wall Street has liked what it has seen. Iridium's stock is hovering around $57, up from its initial public offering opening price of $20. Yet, whether it's telecommunications or high resolution satellite imagery, the technology industry is a fickle market. Without the vision or ability to remain flexible in the market, today's star performers can easily get relegated to tomorrow's has-been corporations.
Motorola, it would appear, understands these risks. In the face of announced competition from Globalstar, headed by Loral Corporation, and ICO Global Communications, Motorola has also established itself as the prime contractor for the Teledesic communications system-a potential Iridium competitor. It is also one of the principal investors in this project, along with Microsoft.
What does this portend for the satellite imaging industry? I believe the business model unfolding for Iridium holds many parallels. Here are a few observations.
• Time is money.
• Price is relative when competition intervenes.
• Timing has a lot to do with perceived pre-eminence in a marketplace.
• Wall Street loves a winner.
• When possible, hedge your bet. While the prospect for profits is what drives Motorola to invest in large projects like Iridium and Teledesic, end-users also stand to win if the decisions governing the company's hunches are able to keep up with the changes in the wireless communications industry.
Meanwhile, anxious satellite imaging end-users hold their breath waiting for the successful roll-out of the long-awaited high resolution, multi/hyper spectral imagery. Do we dare ask whether yesterday's business plan is still in use? Greg Thomason Back |
