COMMENTARY -- All the story needs is Gloria Gaynor singing in the background:
"And so you're back from outer space..."
Iridium's satellites will keep floating above our heads, thanks to the beneficence -- or foolishness -- of a New York bankruptcy court judge who this week approved a $25 million bid from a group backed by Dan Colussy, a former Pan Am president. Colussy reportedly plans to sell worldwide communications to the U.S. government (can always count on Uncle Sam to buy an overpriced, technologically obsolete service), and eventually other agencies that need a phone in the middle of nowhere.
For those of us based in civilization, hopefully the judge's decision ends this long-running series of technological blunders and financing cliff-hangers. Iridium started dying seemingly minutes after it began commercial service. Unfortunately, it lasted long enough to cost Motorola not only its initial investment, but hundreds of millions more in accounting charges when Iridium couldn't pay for services rendered.
When Iridium declared bankruptcy in August of last year, most observers figured it would only be a matter of time before Motorola washed its hands of the whole business. Instead it dragged on. And on. And on.
"Did I crumble?
Did you think I'd lay down and die?
Oh no, not I.
I will survive..."
Motorola thought it had a $600 million rescuer in Craig McCaw, who toyed with the idea of adding the Iridium constellation to his ICO-Teledesic network. That plan ended in March when McCaw woke up and realized Iridium's technology couldn't accomodate his goals, which include a broadband network in the sky that requires speeds far higher than anything Iridium can handle.
A planned $50 million sale to Merchant Bank Castle Harlan died in July. The would-be buyers decided Iridium simply could not produce enough revenue to make it worthwhile.
August's bankruptcy court hearing was canceled for lack of buyers. Iridium service ended in the Americas and Motorola indicated it would finally send the Iridium birds out in a blaze of atmospheric fire.
Sadly for those wishing to be free of the agony, more buyers materialized. One outfit offered $100 million. Another waved $30 million. And Colussy stepped in with $25 million. His group was the only one ready to put down a deposit, according to bankruptcy Judge Cornelius Blackshear.
At such a bargain basement price for a $5 billion satellite network, Colussy might just find a way to turn a profit on Iridium. Too bad he didn't step forward in July -- he could have saved Motorola at least $40 million, given the network's monthly cost of operation ($10 million and change, according to Motorola). That maintenance will now be the problem of Boeing (NYSE: BA), which agreed to operate Iridium for Colussy's firm.
People moan about worthless dot-coms still hanging around, but Internet penny stock firms have nothing on the satellite phone industry.
After all, Iridium isn't the only one satellite provider to get some kind of reprieve recently. Loral Space & Communications (NYSE: LOR) last week bought the $500 million credit facility of Globalstar Telecommunications (Nasdaq: GSTRF).
Loral's move means Globalstar's debt is now owned by Loral, which also happens to be the largest GSTRF shareholder. Should Globalstar fail to meet the revenue targets of the loan -- and that will happen if the current slow growth trend continues -- the company at least won't have to worry about banks calling in the satellites as collateral.
Phone communications satellites must emit some kind of mind control waves on rich investors. Nothing else explains the continued inability to let these bad businesses go away.
"I will survive. Hey, hey..."
• 2HRS2GO: Globalstar keeps staggering
• 2HRS2GO: Drop an Iridium on someone
• THE DAY AHEAD: Motorola has some explaining to do with 4Q>