I want answers to the case study below CASE STUDY The Rise, Fall, and Resurrection of Iridium: A Project Management Perspective The Iridium Project was designed to create a worldwide wireless handheld mobile phone system with the ability to communicate anywhere in the world at any time. Executives at Motorola regarded the project as the eighth wonder of the world. But more than a decade later and after investing billions of dollars, Iridium had solved a problem that very few customers needed solved. What went wrong? How did the Iridium Project transform from a leading-edge technical marvel to a multibillion-dollar blunder? Could the potential catastrophe have been prevented? What it looks like now is a multibillion-dollar science project. There are funda- mental problems: The handset is big, the service is expensive, and the customers haven't really been identified. Chris Chaney, Analyst, A.G. Edwards, 1999 There was never a business case for Iridium. There was never market demand. The decision to build Iridium wasn't a rational business decision. It was more of a religious decision. The remarkable thing is that this happened at a big corpora- tion, and that there was not a rational decision-making process in place to pull the plug. Technology for technology's sake may not be a good business case. Iridium is likely to be some of the most expensive space debris ever. William Kidd, Analyst, C.E. Unterberg, Towbin In 1985, Bary Bertiger, chief engineer in Motorola's strategic electronics division, and his wife, Karen, were on a vacation in the Bahamas. Karen tried to make a cellular telephone call back to her home near the Motorola facility in Chandler, Arizona, to close a real-estate transaction. Unsuccessful, she asked her husband why it would not be possible to create a telephone system that would work anywhere in the world, even in remote locations. At this time, cell technology was in its infancy but was expected to grow at an astounding rate. AT&T projected as many as 40 million subscribers by 2000.1 Cell technology was based on tower-to-tower transmission, as shown in Exhibit I. Each tower, or "gateway" ground station. reached a limited geographic area or cell and had to be within the satellite's field of view. Cell phone users likewise had to be near a gateway that would uplink the transmission to a satellite. The satel- lite would then downlink the signal to another gateway that would connect the transmission to a ground telephone system. This type of communication is often referred to as bent pipe architecture. Physical barriers between the senders/receiv- ers and the gateways, such as mountains, tunnels, and oceans, created interfer- ence problems and therefore limited service to high-density communities. simply stated, cell phones couldn't leave home. And, if they did, there would be additional "roaming" charges. To make matters worse, every country had its own standards, and some cell phones were inoperable when traveling in other countries. RECEIVER AND RECEIVE ANTENNA TRANSMITTER AND TRANSMIT ANTENNA SOLAR PANELS ORIGINATING GROUND STATION GROUND STATION Figure i Typical satellite communication architecture DESTINATION Communications satellites, in use since the 1960s, were typically geo- stationary satellites that orbited at altitudes of more than 22,300 miles. At this altitude, three geosynchronous satellites and just a few gateways could cover most of Earth. But satellites at this altitude meant large phones and annoying quarter-second voice delays. Comsat's Planet 1 phone, for example, weighed in at a computer case-size 4.5 pounds. Geosynchronous satellites require signals with a great deal of power. small mobile phones, with a 1-watt signal, could not work with satellites positioned at this altitude. If the power output of mobile phones was increased, human tissue would be damaged. The alternative was to move the satellites closer to Earth so that less power would be needed. This would require significantly more satellites closer to Earth as well as additional gateways. Geosynchronous satellites, which are 100 times farther away from Earth than low-Earth-orbiting (LEO) satellites, could require almost 10,000 times as much power as LEOs, if everything else were the same. 2 When Bary Bertiger returned to Motorola, he teamed up with Dr. Raymond Leopold and Kenneth Peterson to see if such a worldwide system could be devel- oped while overcoming all of the limitations of existing cell technology. There was also the problem that LEO satellites would be orbiting Earth rapidly and going through damaging temperature variationsfrom the heat of the sun to the cold shadow of Earth.3 The LEO satellites would most likely need to be replaced every 5 years. Numerous alternative terrestrial designs were discussed and abandoned. In 1987 research began on a constellation of LEO satellites moving in polar orbits that could communicate directly with telephone systems on the ground and with one another. Iridium's innovation was to use a large constellation of LEO satellites approx- imately 400 to 450 miles in altitude. Because Iridium's satellites were closer to Earth, the phones could be much smaller and the voice delay would be imper- ceptible. But there were still major technical design problems. With the existing design, a large number of gateways would be required, thus substantially increas- ing the cost of the system. As they left work one day in 1988, Dr. Leopold pro- posed a critical design element. The entire system would be inverted whereby the transmission would go from satellite to satellite until the transmission reached the satellite directly above the person who would be receiving the message. With this approach, only one gateway Earth station would be required to connect mobile- to-landline calls to existing land-based telephone systems. This was considered to be the sought-after solution and was immediately written in outline format on a whiteboard in a security guard's office. Thus arose the idea behind a worldwide wireless handheld mobile phone with the ability to communicate anywhere and anytime. NAMING THE PROJECT Motorola cellular telephone system engineer Jim Williams, from the Motorola facility near Chicago, suggested the name "Iridium." The proposed 77-satellite constellation reminded him of the electrons that encircle the nucleus in the clas- sical Bohr model of the atom. When he consulted the periodic table of elements to discover which atom had 77 electrons, he found iridiuma creative name that had a nice ring. Fortunately, the system had not yet been scaled back to 66 satel- lites, or else he might have suggested the name "Dysprosium." OBTAINING EXECUTIVE SUPPORT Initially, Bertiger's colleagues and superiors at Motorola had rejected the Irid- ium concept because of its cost. Originally, the Iridium concept was considered perfect for the U.s. government. Unfortunately, the era of lucrative government- funded projects was coming to an end, and it was unlikely that the government would fund a project of this magnitude. However, the idea behind the Iridium concept intrigued Durrell Hillis, the general manager of Motorola's space and Technology Group. Hillis believed that Iridium was workable if it could be devel- oped as a commercial system. Hillis instructed Bertiger and his team to continue working on the Iridium concept but to keep it quiet. "I created a bootleg project with secrecy so no one in the company would know about it," Hillis recalls. He was worried that if word leaked out, the ferociously competitive business units at Motorola, all of which had to fight for R&D funds, would smother the project with nay saying. 4 After 14 months of rewrites on the commercialized business plan, Hillis and the Iridium team leaders presented the idea to Robert Galvin, Motorola's chair- man at the time, who gave approval to go ahead with the project. Galvin, and later his successor and son, Christopher Galvin, viewed Iridium as a potential symbol of Motorola's technological prowess and believed that this would become the eighth wonder of the world. In one of the initial meetings, Robert Galvin turned to John Mitchell, Motorola's president and chief operating officer, and said, "If you don't write out a check for this, John, I will, out of my own pocket." 5 To the engineers at Motorola, the challenge of launching Iridium's constel- lation provided considerable motivation. They continued developing the project that resulted in initial service in November 1998 at a total cost of over $5 billion. LAUNCHING THE VENTURE On June 26, 1990, Hillis and his team formally announced the launch of the Iridium Project to the general public. The response was not very pleasing to Motorola: There was skepticism that this would be a new technology, the target markets were too small, the revenue model was questionable, obtaining licenses to operate in 170 countries could be a problem, and the cost of a phone call might be overpriced. Local phone companies that Motorola assumed would buy into the project viewed Iridium as a potential competitor since the Iridium system bypassed traditional landlines. In many countries, postal, telephone, and telegraph operators are state owned and a major source of revenue because of the high profit margins. Another issue was that the Iridium Project was announced before permission was granted by the Federal Communications Commission (FCC) to operate at the desired frequencies. Both Mitchell and Galvin made it clear that Motorola would not go it alone and absorb the initial financial risk for a hefty price tag of about $3.5 billion. Funds would need to be obtained from public markets and private investors. In order to minimize Motorola's exposure to financial risk, Iridium would need to be set up as a project-financed company. Project financing involves the establishment of a legally independent project company where the providers of funds are repaid out of cash flow and earnings and where the assets of the unit (and only the unit) are used as collateral for the loans. Debt repayment would come from the project company only rather than from any other entity. A risk with project financing is that the capital assets may have a limited life. The potential limited life constraint often makes it difficult to get lenders to agree to long-term financial arrangements. Another critical issue with project financing especially for high-tech projects is that the projects are generally long term. It would be nearly eight years before service would begin, and in terms of technology, eight years is an eternity. The Iridium Project was certainly a bet on the future. And if the project were to fail, Motorola could be worth nothing after liquidation. In 1991, Motorola established Iridium Limited Liability Corporation (Irid- ium LLC) as a separate company. In December of 1991, Iridium promoted Leo Mondale to vice president of Iridium International. Financing the project was still a critical issue. Mondale decided that, instead of having just one gateway, there should be as many as 12 regional gateways that plugged into local, ground- based telephone lines. This would make Iridium a truly global project rather than appearing to be an American-based project designed to seize market share from state-run telephone companies. This would also make it easier to get regulatory approval to operate in 170 countries. Investors would pay $40 million for the right to own their own regional gateway. As stated by Flower: "The motive of the investors is clear: They are taking a chance on owning a slice of a de-facto world monopoly. Each of them will not only have a piece of the company, they will own the Iridium gateways and act as the local distributors in their respective home markets. For them it's a game worth playing." 6 There were political ramifications with selling regional gateways. What if in the future the U.s. government forbids shipment of replacement parts to certain gateways? What if sanctions are imposed? What if Iridium were to become a polit- ical tool during international diplomacy because of the number of jobs it creates? In addition to financial incentives, gateway owners were granted seats on the board of directors of Iridium LLC. As described by David Bennahum, reporter for Wired: Four times a year, 28 Iridium board members from 17 countries gather to coor- dinate overall business decisions. They met around the world, shuttling between Moscow, London, Kyoto, Rio de Janeiro, and Rome, surrounded by an entourage of assistants and translators. Resembling a United Nations in miniature, board meetings were conducted with simultaneous translation in Russian, Japanese, Chinese, and English. 7 The partner with the largest equity share was Motorola. For its contribution of $400 million, Motorola originally received an equity stake of 25 percent, and 6 of the 28 seats on Iridium's board. Additionally, Motorola made loan guarantees to Iridium of $750 million, with Iridium holding an option for an additional $350 million loan. For its part, Iridium agreed to $6.6 billion in long-term contracts with Motorola that included $3.4 billion for satellite design and launch and $2.9 bil- lion for operations and maintenance. Iridium also exposed Motorola to develop- ing satellite technology that would provide the latter with significant expertise in building satellite communications systems, as well as vast intellectual property. THE IRIDIUM SYSTEM The operational version of the Iridium system is a satellite-based, wireless personal communications network providing a robust suite of voice features to virtually any destination anywhere on Earth. The Iridium system comprises three principal components: the satellite net- work, the ground network, and the Iridium subscriber products including phones and pagers. The design of the Iridium network allows voice and data to be routed virtually anywhere in the world. Voice and data calls are relayed from one satellite to another until they reach the satellite above the Iridium subscriber unit (handset) and the signal is relayed back to Earth. THE TERRESTRIAL AND SPACE-BASED NETWORK The Iridium constellation consists of 66 operational satellites and 11 spares orbit- ing in a constellation of six polar planes. Each plane has 11 mission satellites performing as nodes in the telephony network. The remaining 11 satellites orbit as spares ready to replace any unserviceable satellite. This constellation ensures that every region on the globe is covered by at least one satellite at all times. The satellites are in a near-polar orbit at an altitude of 485 miles. They circle Earth once every 100 minutes traveling at a rate of 16,832 miles per hour. The satellite weight is 1,500 pounds. Each satellite is approximately 40 feet in length and 12 feet in width. In addition, each satellite has 48 spot beams, 30 miles in diameter per beam. Each satellite is cross-linked to four other satellites: two satellites in the same orbital plane and two in an adjacent plane. The ground network is comprised of the system control segment and telephony gateways used to connect into the ter- restrial telephone system. The system control segment is the central management component for the Iridium system. It provides global operational support and con- trol services for the satellite constellation, delivers satellite-tracking data to the gateways, and performs the termination control function of messaging services. The system control segment consists of three main components: four telemetry tracking and control sites, the operational support network, and the satellite net- work operation center. The primary linkage between the system Control seg- ment, the satellites, and the gateways is via K-band feeder links and cross-links throughout the satellite constellation. Gateways are the terrestrial infrastructure that provides telephony services, messaging, and support to the network operations. The key features of gateways are their support and management of mobile subscribers and the interconnection of the Iridium network to the terrestrial phone system. Gateways also provide net- work management functions for their own network elements and links. PROJECT INITIATION: DEVELOPING THE BUSINESS CASE For the Iridium Project to be a business success rather than just a technical suc- cess, there had to exist an established customer base. Independent studies con- ducted by A.T. Kearney, Booz, Allen & Hamilton, and Gallup indicated that 34 million people had a demonstrated need for mobile satellite services, with that number expected to grow to 42 million by 2002. Of these 42 million, Iridium anticipated 4.2 million to be satellite-only subscribers, 15.5 million satellite and world terrestrial roaming subscribers, and 22.3 million terrestrial roaming-only subscribers. A universal necessity in conducting business is ensuring that you are never out of touch. Iridium would provide this unique solution to business with the essential communications tool. This proposition of one phone, one number with the capability to be accessed anywhere, anytime was a message that target mar- ketsglobal travelers; mining, rural, and maritime industries; governments; dis- aster relief; and community aid groupswould readily embrace. Also at the same time of Iridium's conception, another potentially lucrative opportunity in the telecommunications marketplace. When users of mobile or cel- lular phones crossed international borders, they soon discovered that there existed a lack of common standards, thus making some phones inoperable. Motorola viewed this as an opportunity to create a worldwide standard allowing phones to be used anywhere in the world. The expected breakeven market for Iridium was estimated between 400,000 and 600,000 customers globally, assuming a reasonable usage rate per customer per month. With a launch date for Iridium service established for 1998, Iridium hoped to recover all of its investment within one year. By 2002, Iridium antici- pated a customer base of 5 million users. The initial Iridium target market had been the vertical market, those of the industry, government, and world agencies that have defended needs and far-reaching communication requirements. Also important would be both industrial and public sector customers. Often isolated in remote locations outside of cellular coverage, industrial users were expected to use handheld Iridium satellite services to complement or replace their exist- ing radio or satellite communications terminals. The vertical markets for Iridium would include: Aviation Construction Disaster relief/emergency Forestry Government Leisure travel Maritime Media and entertainment Military Mining Oil and gas Utilities Using its own marketing resources, Iridium appeared to have identified an attractive market segment after having screened over 200,000 people, interviewed 23,000 people from 42 countries, and surveyed over 3,000 corporations. The Rise, Fall, and Resurrection of Iridium: A Project Management Perspective 263 Iridium would also need regional strategic partners, not only for investment purposes and to share the risks but to provide services throughout their territo- ries. The strategic regional partners or gateway operating companies would have exclusive rights to their territories and were obligated to market and sell Iridium services. The gateways would also be responsible for end user sales, activation and deactivation of Iridium services, account maintenance, and billing. Iridium would need each country to grant full licenses for access to the Irid- ium system. Iridium would need to identify the "priority" countries that would account for the majority of the business plan. Because of the number of countries involved in the Iridium network, Iridium would need to establish global Customer Care Centers for support services in all languages. No matter where an Iridium user was located, he or she would have access to a customer service representative in the user's native language. The Cus- tomer Care Centers would be strategically located to offer support 24 hours a day, seven days a week, and 365 days a year. THE "HIDDEN" BUSINESS CASE The decision by Motorola to invest heavily into the Iridium Project may have been driven by a secondary or hidden business case. Over the years, Motorola achieved a reputation of being a first mover (i.e., first to market). With the Iridium Project, Motorola was poised to capture first-mover advantage in providing global telephone service via LEO satellites. In addition, even if the Iridium Project never resulted in providing service, Motorola would still have amassed valuable intel- lectual property that could make it the major player for years to come in satellite communications. Robert and Christopher Galvin also may have desired to have their names etched in history as pioneers in satellite communication. RISK MANAGEMENT Good business cases identify the risks that the project must consider. For simplic- ity's sake, the initial risks associated with the Iridium Project could be classified as technology, development, financial, or marketing risks. Technology Risks Although Motorola had some technology available for the Iridium Project, there was still the need to develop additional technology, specifically satellite commu- nications technology. The development process was expected to take years and would eventually result in numerous patents. Mark Gercenstein, Iridium's vice president of operations, explained the sys- tem's technological complexity: "More than 26 completely impossible things had to happen first, and in the right sequence (before we could begin operations)like getting capital, access to the marketplace, global spectrum, the same frequency band in every country of operations."8 While there was still some risk in the development of new technology, Motorola had the reputation of being a high-tech, can-do company. The engineers at Motorola believed that they could bring forth miracles in technology. Motorola also had a reputation for being a first mover with new ideas and products, and there was no reason to believe that this would not happen on the Iridium Project. There was no competition for Iridium at the inception of the project. Because the project schedule was more than a decade in duration, there was the risk of technology obsolescence. This required that certain assumptions be made concerning technology a decade downstream. Developing a new product is relatively easy if the environment is stable. But in a high-tech environment that is both turbulent and dynamic, it is extremely difficult to determine how customers will perceive and evaluate the product 10 years later. Development Risks The satellite communication technology, once developed, had to be manufac- tured, tested, and installed in the satellites and ground equipment. Even though the technology existed or would exist, there were still transitional or development risks from engineering, to manufacturing, to implementation that would bring with them additional problems that were not contemplated or foreseen. Financial Risks The cost of the Iridium Project would most certainly be measured in the billions of dollars. This would include the costs for technology development and implemen- tation, the manufacture and launch of satellites, the construction of ground sup- port facilities, and marketing and supervision. Raising money from Wall street's credit and equity markets was years away. Investors were unlikely to put up the necessary hundreds of millions of dollars on merely an idea or a vision. The tech- nology needed to be developed and possibly accompanied by the launch of a few satellites before the credit and equity markets would come on board. Private investors were a possibility, but the greatest source of initial funding would have to come from the members of the Iridium consortium. Although shar- ing the financial risks among the membership seemed appropriate, there was no question that bank loans and lines of credit would be necessary. since the Iridium Project was basically an idea, the banks would require some form of collateral or guarantee for the loans. Motorola, being the largest stakeholder (and also with the deepest pockets), would need to guarantee the initial loans. Marketing Risks The marketing risks were certainly the greatest risks facing the members of the Iridium consortium. Once again, the risks were shared among the membership where each member was expected to sign up customers in its geographic area. Each consortium member had to aggressively sign up customers for a product that did not exist yet, where no prototypes existed to be shown to the customers, where limitations on the equipment were unknown as yet, and where significant changes in technology could occur between the time the customer signed up and the time the system was ready for use. Companies that saw the need for Iridium today may not see the same need 10 years later. Motivating the consortium partners to begin marketing immediately would be extremely difficult since marketing material was nonexistent. There was also the very real fear that the consortium membership would be motivated more by the technology than by the necessary size of the customer base required. The risks were interrelated. The financial risks were highly dependent on the marketing risks. If a sufficient customer base could not be signed up, there could be significant difficulty in raising capital. THE COLLECTIVE BELIEF Although the literature does not clearly identify it, there was most likely a collec- tive belief among the workers assigned to the Iridium Project. A collective belief is a fervent, and perhaps blind, desire to achieve that can permeate an entire team, the project sponsor, and even the most senior levels of management. A collective belief can make a rational organization act in an irrational manner. When a collective belief exists, people are selected based on their support for that belief. Nonbelievers are pressured into supporting the collective belief, and team members are not allowed to challenge the results. As the collective belief grows, both advocates and nonbelievers are trampled. The pressure of the collec- tive belief can outweigh the reality of the results. There are several characteristics of the collective belief, which is why some large, high-tech projects are often difficult to kill: Inability or refusal to recognize failure Refusing to see the warning signs seeing only what you want to see Fear of exposing mistakes Viewing bad news as a personal failure Viewing failure as a sign of weakness 266 PROJECT MANAGEMENT CAsE sTUDIEs Viewing failure as damage to one's career Viewing failure as damage to one's reputation THE EXIT CHAMPION Project champions do everything possible to make their projects successful. But what if the project champions and the project team have blind faith in the success of the project? What happens if the strongly held convictions and the collective belief disregard early warning signs of imminent danger? What happens if the collective belief drowns out dissent? In such cases, an exit champion must be assigned. The exit champion some- times needs to have some direct involvement in the project in order to have cred- ibility. Exit champions must be willing to put their reputations on the line and possibly face the likelihood of being cast out from the project team. According to Isabelle Royer: sometimes it takes an individual, rather than growing evidence, to shake the collec- tive belief of a project team. If the problem with unbridled enthusiasm starts as an unintended consequence of the legitimate work of a project champion, then what may be needed is a countervailing forcean exit champion. These people are more than devil's advocates. Instead of simply raising questions about a project, they seek objective evidence showing that problems in fact exist. This allows them to challengeor, given the ambiguity of existing data, conceivably even to confirm the viability of a project. They then take action based on the data.9 The larger the project and the greater the financial risk to the firm, the higher up the exit champion should reside. On the Iridium Project, the collective belief orig- inated with Galvin, Motorola's CEO. Therefore, who could possibly function as the exit champion on the Iridium Project? since it most likely should be someone higher up than Galvin, the exit champion should have been someone on the board of directors or even the entire Iridium board of directors. Unfortunately, the entire Iridium board of directors was also part of the col- lective belief and shirked its responsibility for oversight on the Iridium Project. In the end, Iridium had no exit champion. Large projects incur large cost overruns and schedule slippages. Once a project has started, making the decision to cancel is very difficult, according to David Davis. The difficulty of abandoning a project after several million dollars have been committed to it tends to prevent objective review and recosting. For this reason, ideally an independent management teamone not involved in the projects developmentshould do the recosting and, if possible, the entire review. . If the numbers do not hold up in the review and recosting, the company should abandon the project. The number of bad projects that make it to the operational stage serves as proof that their supporters often balk at this decision. . . . senior managers need to create an environment that rewards honesty and courage and provides for more decision making on the part of project managers. Companies must have an atmosphere that encourages projects to succeed, but executives must allow them to fail. 10 The longer the project, the greater the necessity for the exit champions and project sponsors to make sure that the business plan has exit ramps such that the project can be terminated before massive resources are committed and consumed. Unfortunately, when a collective belief exists, exit ramps are purposefully omitted from the project and business plans. IRIDIUM'S INFANCY YEARS By 1992, the Iridium Project attracted such stalwart companies as General Electric, Lockheed, and Raytheon. some companies wanted to be involved to be part of the satellite technology revolution while others were afraid of falling behind the technology curve. In any event, Iridium was lining up strategic partners, but slowly. The Iridium Plan, submitted to the FCC in August 1992, called for a constel- lation of 66 satellites, expected to be in operation by 1998, more powerful than originally proposed, thus keeping the project's cost at the previously estimated $3.37 billion. But the Iridium Project, while based on lofty forecasts of available customers, was now attracting other companies competing for FCC approval on similar satellite systems. These companies included Loral Corp., TRW Inc., and Hughes Aircraft Co., a unit of General Motors Corp. At least nine companies were competing for the potential billions of dollars in untapped revenue possible from satellite communications. Even with the increased competition, Motorola was signing up partners. Motorola had set an internal deadline of December 15, 1992, to find the neces- sary funding for Iridium. signed letters of intent were received from the Brazilian government and United Communications Co., of Bangkok, Thailand, to buy 5 percent stakes in the project, each now valued at about $80 million. The terms of the agreement implied that the Iridium consortium would finance the project with roughly 50 percent equity and 50 percent debt. When the December 15 deadline arrived, Motorola was relatively silent on the signing of funding partners, fueling speculation that it was having trouble. Motorola did admit that the process was time-consuming because some inves- tors required government approval before proceeding. Motorola was expected to announce at some point, perhaps in the first half of 1993, whether it was ready to proceed with the next step, namely receiving enough cash from its investors, securing loans, and ordering satellite and group equipment. As the competition increased, so did the optimism about the potential size of the customer base. "We're talking about a business generating billions of dollars in revenue," says John Mitchell, Vice Chairman at Motorola. "Do a simple income extrapolation," adds Edward J. Nowacki, a general manager at TRW's space & Electronics Group, Redondo Beach, Calif., which plans a $1.3 billion, 12-satellite system called Odyssey. "You conclude that even a tiny fraction of the people around the world who can afford our services will make them successful." Mr. Mitchell says that if just 1% to 1.5% of the expected 100 million cellular users in the year 2000 become regular users at $3 a minute, Iridium will breakeven. How does he know this? "Marketing studies," which he won't share. TRW's Mr. Nowacki says Odyssey will blanket the Earth with two-way voice communication service priced at "only a slight premium" to cellular. "With two million subscribers we can get a substantial return on our investment," he says. "Loral Qualcomm satel- lite services, Inc. aims to be the 'friendly' satellite by letting phone-company partners use and run its system's ground stations," says Executive Vice President Anthony Navarra. "By the year 2000 there will be 15 million unserved cellular customers in the world," he says.11 But while Motorola and other competitors were trying to justify their invest- ment with "inflated market projections" and a desire from the public for faster and clearer reception, financial market analysts were not so benevolent. First, market analysts questioned the size of the customer base that would be willing to pay $3,000 or more for a satellite phone in addition to $3 to $7 per minute for a call. second, the system required a line-of-sight transmission, which meant that the system would not work in buildings or in cars. If a businessman were attending a meeting in Bangkok and needed to call his company, he must exit the building, raise the antenna on his $3,000 handset, point the antenna toward the heavens, and then make the call. Third, the low-flying satellites would eventually crash into Earth's atmosphere every five to seven years because of atmospheric drag and would need to be replaced. That would most likely result in high capital costs. And fourth, some industry analysts believed that the start-up costs would be closer to $6 to $10 billion rather than the $3.37 billion estimated by Iridium. In addition, the land-based cellular phone business was expanding in more countries, thus creating another competitive threat for Iridium. The original business case needed to be reevaluated periodically. But with strong collective beliefs and no exit champions, the fear of a missed opportunity, irrespective of the cost, took center stage. Reasonably sure that 18 out of 21 investors were on board, Motorola hoped to start launching test satellites in 1996 and begin commercial service by 1998. But critics argued that Iridium might be obsolete by the time it actually started working. Eventually, Iridium was able to attract financial support from these strategic partners: AIG Affiliated Companies China Great Wall Industry Corporation (CGWIC) Iridium Africa Corporation (based in Cape Town) Iridium Canada, Inc. Iridium India Telecom Private Ltd, (ITIL) Iridium Italia s.p.A. Iridium Middle East Corporation Iridium sudAmerica Corporation Khrunichev state Research and Production space Center Korea Mobile TELECOM Lockheed Martin Motorola Nippon Iridium Corporation Pacific Electric Wire & Cable Co. Ltd (PEWC) Raytheon sTET sprint Thai satellite Telecommunications Co., Ltd. Verbacom seventeen of the strategic partners also participated in gateway operations with the creation of operating companies. The Iridium board of directors consisted of 28 telecommunications execu- tives. All but one board member was a member of the consortium as well. This made it very difficult for the board to fulfill its oversight obligation, effectively giving the members vested/financial interests in the Iridium Project. In August 1993, Lockheed announced that it would receive $700 million in revenue for satellite construction. Lockheed would build the satellite structure, solar panels, attitude and propulsion systems, along with other parts and would supply engineering support. Motorola and Raytheon Corp. would build the satel- lite's communications gear and antenna. In April 1994, McDonnell Douglas Corp. received from Iridium a $400 mil- lion contract to launch 40 satellites for Iridium. Other contracts for launch services would be awarded to Russia's Khrunichev space Center and China's Great Wall Industry Corporation, both members of the consortium. The lower-cost contracts with Russia and China were putting extraordinary pressure on U.s. providers to lower their costs. Also at the same time, one of Iridium's competitors, the Globalstar system, which was a 48-satellite mobile telephone system led by Loral Corporation, announced that it intended to charge 65 cents per minute in the areas it served. Iridium's critics were arguing that Iridium would be too pricey to attract a high volume of callers.12 DEBT FINANCING In september 1994, Iridium said that it had completed its equity financing by raising an additional $733.5 million. This brought the total capital committed to Iridium through equity financing to $1.57 billion. The completion of equity financing permitted Iridium to enter into debt financing to build the global wire- less satellite network. In september 1995, Iridium announced that it would be issuing $300 million 10-year senior-subordinated discounted notes rated Caa by Moody's and CCC+ by standard & Poor's, via the investment banker Goldman sachs Inc. The bonds were considered to be high-risk, high-yield "junk" bonds after investors con- cluded that the rewards were not worth the risk. The rating agencies cited the reasons for the low rating to be yet-unproven sophisticated technology and the fact that a significant portion of the system's hardware would be located in space. But there were other serious concerns: The ultimate cost of the Iridium Project would be more like $6 billion or higher rather than $3.5 billion, and it was unlikely that Iridium would recover that cost. Iridium would be hemorrhaging cash for several more years before ser- vice would begin. The optimistic number of potential customers for satellite phones might not choose the Iridium system. The number of competitors had increased since the Iridium concept was first developed. If Iridium defaulted on its debt, the investors could lay claim to Iridium's assets. But what would investors do with more than 66 satellites in space, waiting to disintegrate upon reentering the atmosphere? Iridium was set up as "project financing" in which case, if a default occurred, only the assets of Iridium could be attached. With project financing, the consortium's investors would be held harmless for any debt incurred from the stock and bond markets and could simply walk away from Iridium. Those who invested in the equity and credit markets well understood the risks associated with project financing. Goldman sachs Inc., the lead underwriter for the securities offering, deter- mined that for the bond issue to be completed successfully, there would need to exist a completion guarantee from investors with deep pockets, such as Motorola. Goldman sachs cited a recent $400 million offering by one of Iridium's competi- tors, Globalstar, which had a guarantee from the managing general partner, Loral Corp.13 Because of investor concern, Iridium withdrew its planned $300 million debt offering. Also, Globalstar, even with its loan guarantee, eventually withdrew its $400 million offering. Investors wanted both an equity position in Iridium and a 20 percent return. Additionally, Iridium would need to go back to its original 17-member consortium and arrange for internal financing. In February 1996, Iridium had raised an additional $315 million from the 17-member consortium and private investors. In August 1996, Iridium had secured a $750 million credit line with 62 banks coarranged by Chase securities Inc., a unit of Chase Manhattan Corp. and the investment banking division of Barclays Bank PLC. The credit line was oversubscribed by more than double its original goal because the line of credit was backed by a financial guarantee by Motorola and its AAA credit rating. Because of the guarantee by Motorola, the lending rate was slightly more than the 5.5 percent baseline international commercial lending rate and significant lower than the rate in the $300 million bond offering that was eventually recalled. Despite this initial success, Iridium still faced financial hurdles. By the end of 1996, Iridium planned on raising more than $2.65 billion from investors. It was estimated that more than 300 banks around the globe would be involved and that this would be the largest private debt placement ever. Iridium believed that this debt placement campaign might not be that difficult since the launch date for its services was getting closer. THE M-STAR PROJECT In October 1996, Motorola announced that it was working on a new project dubbed M-star, which would be a $6.1 billion network of 72 low-orbit satel- lites capable of worldwide voice, video, and high-speed data links targeted at the international community. The project was separate from the Iridium venture and was expected to take four years to complete after FCC approval. According to Bertiger, now corporate vice president and general manager of Motorola's satellite communications group, "Unlike Iridium, Motorola has no plans to detach M-star as a separate entity. We won't fund it ourselves, but we will have fewer partners than in Iridium."14 The M-star Project raised some eyebrows in the investment community. Irid- ium employed 2,000 people but M-star had only 80. The Iridium Project gener- ated almost 1,100 patents for Motorola and that intellectual property would most likely be transferred to M-star. Also, Motorola had three contracts with Iridium for construction and operation of the global communication system providing for approximately $6.5 billion in payments to Motorola over a 10-year period that began in 1993. Was M-star being developed at the expense of Iridium? Could M-star replace Iridium? What would happen to the existing 17-member consor- tium at Iridium if Motorola were to withdraw its support in lieu of its own internal competitive system? A NEW CEO In 1996, Iridium began forming a very strong top management team with the hir- ing of Dr. Edward staiano as CEO and vice chairman. Prior to joining Iridium in 1996, staiano had worked for Motorola for 23 years, during which time he developed a reputation for being hard-nosed and unforgiving. During his final 11 years with Motorola, staiano led the company's General systems sector to record growth levels. In 1995, the division accounted for approximately 40 percent of Motorola's total sales of $27 billion. In leaving Motorola's payroll for Iridium's, staiano gave up a $1.3-million-per-year contract with Motorola for a $500,000 base salary plus 750,000 Iridium stock options that vested over a five-year period. staiano commented, "I was spending 40 percent to 50 percent of my time [at Motorola] on Iridium anyway. . . If I can make Iridium's dream come true, I'll make a significant amount of money."15 SATELLITE LAUNCHES At 11:28 a.m. on a Friday morning the second week of January 1997, a Delta 2 rocket carrying a Global Positioning system (GPs) exploded upon launch, scat- tering debris above its Cape Canaveral launch pad. The launch, which was origi- nally scheduled for the third quarter of 1996, would certainly have an impact on Iridium's schedule, while an industry board composed of representatives from McDonnell-Douglas and the Air Force determined the cause of the explosion. Other launches had already been delayed for a variety of technical reasons. In May of 1997, after six failed tries, the first five Iridium satellites were launched. Iridium still believed that the target date for launch of service, septem- ber 1998, was still achievable but that all slack in the schedule had been elimi- nated due to the earlier failures. By this time, Motorola had amassed tremendous knowledge on how to mass- produce satellites. As described by Bennahum: The Iridium constellation was built on an assembly line, with all the attendant reduction in risk and cost that comes from doing something over and over until it is no longer an art but a process. At the peak of this undertaking, instead of taking 18 to 36 months to build one satellite, the production lines disgorged a finished bird every four and a half days, sealed it in a container, and placed it on the flatbed of an idling truck that drove it to California or Arizona, where a wait- ing Boeing 747 carried it to a launch pad in the mountains of Taiyuan, China, or on the steppes of Baikonur in Kazakhstan.16 AN INITIAL PUBLIC OFFERING Iridium was burning cash at the rate of $100 million per month. Iridium filed a preliminary document with the securities and Exchange Commission for an ini- tial public offering (IPO) of 10 million shares to be offered at $19 to $21 a share. Because of the launch delays, the IPO was delayed. In June of 1997, after the first five satellites were placed in orbit, Iridium filed for an IPO of 12 million shares priced at $20 per share. This would cover about three months of operating expenses including satellite purchases and launch costs. The majority of the money would go to Motorola. SIGNING UP CUSTOMERS The reality of the Iridium concept was now at hand. All that was left to do was to sign up 500,000 to 600,000 customers, as predicted, to use the service. Iridium set aside $180 million for a marketing campaign including advertising, public relations, and a worldwide, direct mail effort. Part of the advertising campaign included direct mail translated into 13 languages, ads on television and on air- lines, airport booths, and Internet web pages. How to market Iridium was a challenge. People would certainly hate the phone. According to John Windolph, executive director of marketing communica- tions at Iridium, "It's huge! It will scare people. It is like a brick-size device with an antenna like a stout bread stick. If we had a campaign that featured our product, we'd lose." The decision was to focus on the fears of being out of touch. Thus, the marketing campaign began. But Iridium still did not have a clear picture of who would subscribe to the system. An executive earning $700,000 would probably purchase the bulky phone, have his or her assistant carry the phone in his or her briefcase, be reimbursed by the company for the use of the phone, and pay $3 to $7 per minute for calls, also a business expense. But were there 600,000 execu- tives worldwide who needed the service? several other critical questions needed to be addressed. How do we hide or downplay the $3,400 purchase price of the handset and the usage cost of $7 per minute? How do we avoid discussions about competitors that are offering similar services at a lower cost? With operating licenses in about 180 countries, do we advertise in all of them? Do we take out ads in Oil and Gas Daily? Do we adver- tise in girlie magazines? Do we use full-page or double-page spreads? Iridium had to rely heavily on its "gateway" partners for marketing and sales support. Iridium itself would not be able to reach the entire potential audience. Would the gateway partners provide the required marketing and sales support? Do the gateway partners know how to sell the Iridium system and the associated products? The answer to these questions appeared quickly. Over a matter of weeks, more than one million sales inquiries poured into Irid- ium's sales offices. They were forwarded to Iridium's partnersand many of them promptly disappeared, say several Iridium insiders. With no marketing channels and precious few sales people in place, most global partners were una- ble to follow up on the inquiries. A mountain of hot sales tips soon went cold.17 IRIDIUM'S RAPID ASCENT On November 1, 1998, the Iridium system was officially launched. It was truly a remarkable feat that the 11-year project was finally launched, just a little more than a month late. After 11 years of hard work, we are proud to announce that we are open for business. Iridium will open up the world of business, commerce, disaster relief, and humanitarian assistance with our first-of-its-kind global communications service. . . . The potential use of Iridium products is boundless. Business people who travel the globe and want to stay in touch with home and office, industries that operate in remote areasall will find Iridium to be the answer to their com- munications needs.18 17 Leslie Cauley, "Losses in spaceIridium's Downfall: The Marketing Took a Back seat to sci- enceMotorola and Partners spent Billions on satellite Links for a Phone Few Wanted," Wall Street Journal, August 18, 1999, p. A1. 18 Excerpts from the Iridium press release, November 1, 1998. On November 2, 1998, Iridium began providing service. With the Iridium system finally up and running, most financial analysts issued "buy" recommenda- tions for Iridium stock with expected yearly revenues of $6 to $7 billion within five years. On January 25, 1999, Iridium held a news conference to discuss its earnings for the fourth quarter of 1998. Ed staiano, CEO of Iridium stated: In the fourth quarter of 1998, Iridium made history as we became the first truly global mobile telephone company. Today, a single wireless network, the Iridium Network, covers the planet. And we have moved into 1999 with an aggressive strategy to put a large number of customers on our system, and quickly transform Iridium from a technological event to a revenue generator. We think the prospects for doing this are excellent. Our system is performing at a level beyond expecta- tions. Financing is now in place through projected cash flow positives. Customer interest remains very high and a number of potentially large customers have now evaluated our service and have given it very high ratings. With all of this going for us, we are in position to sell the service and that is precisely where we are focusing the bulk of our efforts.19 Roy Grant, chief financial officer of Iridium, stated: Last week Iridium raised approximately $250 million through a very successful 7.5 million-share public offering. This offering had three major benefits. It pro- vided $250 million of cash to our balance sheet. It increased our public float to approximately 20 million shares. And it freed up restrictions placed on $300 mil- lion of the $350 million of Motorola guarantees. These restrictions were placed on that particular level of guarantees by our bankers in our $800 million secured credit facility. With this $250 million, combined with the $350 million of additional guaran- tees from Motorola, this means we have approximately $600 million of funds in excess of what we need to break cash flow breakeven. This provides a significant contingency for the company.20 DECEMBER 1998 In order to make its products and services known to travelers, Iridium agreed to acquire Claircom Corporation from AT&T and Rogers Cantel Mobile Commu- nications for about $65 million. Claircom provided in-flight telephone systems for U.s. planes as well as equipment for international carriers. The purchase of Claircom would be a marketing boost for Iridium. 19 Excerpts from the Iridium conference call, January 25, 1999. 20 Ibid. The problems with large, long-term technology projects were now appearing in the literature. As described by Bennahum: "This system does not let you do what a lot of wired people want to do," cau- tions Professor Heather Hudson, who runs the telecommunications program at the University of san Francisco and studies the business of wireless communica- tions. "Nineteen-nineties technologies are changing so fast that it is hard to keep up. Iridium is designed from a 1980s perspective of a global cellular system. since then, the Internet has grown and cellular telephony is much more perva- sive. There are many more opportunities for roaming than were assumed in 1989. so there are fewer businesspeople who need to look for an alternative to a cell phone while they are on the road."21 Additionally, toward the late 1990s, some industry observers felt that Motorola had an additional incentive to ensure that Iridium succeeded, irrespec- tive of the costsnamely, protecting its reputation. Between 1994 and 1997, Motorola had suffered slowing sales growth, a decline in net income, and declin- ing margins. Moreover, the company had experienced several previous business mishaps, including a failure to anticipate the cellular industry's switch to digital cell phones, which played a major role in Motorola's more than 50 percent share- price decline in 1998. IRIDIUM'S RAPID DESCENT It took more than a decade for the Iridium Project to ascend and only a few months to descend. In the first week of March, almost five weeks after the January teleconference, Iridium's financial woes began to surface. Iridium had expected 200,000 subscribers by the end of 1998 and additional subscribers at a rate of 40,000 per month. Iridium's bond covenants stated a target of 27,000 subscrib- ers by the end of March. Failure to meet such a small target could send investor confidence spiraling downward. Iridium had only 10,000 subscribers. The market that was out there 10 years ago was not the market that was there today. Also, 10 years ago Iridium faced little competition. Iridium cited the main causes of the shortfall in subscriptions as shortages of phones, glitches in some of the technology, software problems, and, most impor- tant, a lack of trained sales channels. Iridium found out that it had to train a sales staff and that Iridium itself would have to sell the product, not its distributors. The investor community did not appear pleased with the sales problem, which should have been addressed years ago, not four months into commercial service. Iridium's advertising campaign was dubbed "Calling Planet Earth" and prom- ised that you had the freedom to communicate anytime and anywhere. This was 21 Bennahum, "The United Nations of Iridium." Table i covenanTs on The crediT agreemenT Date March 31, 1999 June 30, 1999 sept. 30, 1999 Cumulative Cash Revenue ($ Millions) $4 50 220 Cumulative Accrued Revenue ($ Millions) $ 30 150 470 Number of Satellite Phone Subscribers 27,000 88,000 173,000 Number of System Subscribers 52,000 213,000 454,000 *Total system subscribers include users of Iridium's phone, fax, and paging services. Source: Iridium World Communications Ltd., 1998 Annual Report. not exactly true; the system could not work in buildings or even cars. Furthermore, Iridium underestimated the amount of time subscribers would require to examine and test the system before signing on. In some cases, this would be six months. Many people blamed marketing and sales for Iridium's rapid descent: True, Iridium committed so many marketing and sales mistakes that its experi- ences could form the basis of a textbook on how not to sell a product. Its phones started out costing $3,000, were the size of a brick, and didn't work as promised. They weren't available in stores when Iridium ran a $180 million advertising campaign. And Iridium's prices, which ranged from $3.00 to $7.50 a call, were out of this world. Iridium's business plan was flawed. With service beginning on November 2, 1998, it was unlikely that 27,000 subscribers would be on board by March of 1999, given the time required to test the product. The original business plan required that the consortium market and sell the product prior to the onset of service. But sell- ing the service from just a brochure was almost impossible. subscribers want to touch the phone, use it, and test it prior to committing to a subscription. Iridium announced that it was entering into negotiations with its lenders to alter the terms of an $800 million secured credit agreement due to the weaker- than-expected subscriber and revenue numbers (Table I). The stock, which had traded as high as almost $73 per share, was now at approximately $20 per share. And in yet another setback, the chief financial officer, Roy Grant, resigned. April 1999 Iridium's CEO, Ed staiano, resigned at the April 22 board meeting. sources believed that staiano resigned when the board nixed his request for additional funds to develop Iridium's own marketing and distribution team rather than relying on its strategic partners. sources also stated another issue: staiano had cut costs to the bare bones at Iridium but could not get Motorola to reduce its lucrative $500 million service contract with Iridium. some people believed that staiano wanted to reduce the Motorola service contract by up to 50 percent. John Richard- son, the CEO of Iridium Africa Corp., was assigned as interim CEO. Richardson's expertise was in corporate restructuring. For the quarter ending March, Iridium said it had a net loss of $505.4 million, or $3.45 a share. The stock fell to $15.62 per share. Iridium managed to attract just 10,294 subscribers five months after commercial rollout. One of Richardson's first tasks was to revamp Iridium's marketing strategy. Iridium was unsure as to what business it was in. According to Richardson, The message about what this product was and where it was supposed to go changed from meeting to meeting. . . . One day, we'd talk about cellular applica- tions, the next day it was a satellite product. When we launch in November, I'm not sure we had a clear idea of what we wanted to be.23 May 1999 Iridium officially announced that it did not expect to meet its targets specified under the $800 million loan agreement. Lenders granted Iridium a two-month extension. The stock dropped to $10.44 per share, partly due to a comment by Motorola that it might withdraw from the ailing venture. Wall street began talking about the possibility of bankruptcy. But Iridium stated that it was revamping its business plan and by the end of May hoped to have chartered a new course for its financing. Iridium also stated in a regulatory filing that it was uncertain whether it would have enough cash to complete the agree- ment to purchase Claircom Communications Group Inc., an in-flight telephone service provider, for the promised $65 million in cash and debt. Iridium had received extensions on debt payments because the lending com- munity knew that moving from a project plan to an operating business was no small feat. Another reason why the banks and creditors were willing to grant extensions was because bankruptcy was not a viable alternative. The equity part- ners owned all of the Earth stations, all distribution, and all regulatory licenses. If the banks and creditors forced Iridium into bankruptcy, they could end up owning a satellite constellation that could not talk to the ground or gateways. June 1999 Iridium received an additional 30-day extension beyond the two-month extension it had already received. Iridium was given until June 30 to make a $90 million bond payment. Iridium began laying off 15 percent of its 550-employee work- force including two senior officers. The stock had now sunk to $6 per share, and the bonds were selling at 19 cents on the dollar. John Richardson, CEO of Iridium, said: "We did all of the difficult stuff well, like building the network, and did all of the no-brainer stuff at the end poorly."24 In a later interview, John Richardson stated: Iridium's major mistake was a premature launch for a product that wasn't ready. People became so obsessed with the technical grandeur of the project that they missed fatal marketing traps. . . . Iridium's international structure has proven almost impossible to manage: the 28 members of the board speak multiple lan- guages, turning meetings into mini-U.N. conferences complete with headsets translating the proceedings . . . into five languages. We're a classic MBA case study in how not to introduce a product. First we created a marvelous technological achievement. Then we asked how to make money on it.25 Iridium was doing everything possible to avoid bankruptcy. Time was what Iridium needed. some industrial customers would take six to nine months to try out a new product but would be reluctant to subscribe if it appeared that Iridium would be out of business in six months. In addition, Iridium's competitors were lowering their prices significantly, putting further pressure on Iridium. Richardson then began providing price reductions of up to 65 percent off the original price for some of Iridium's products and services. July 1999 The banks and investors agreed to give Iridium yet a third extension to August 11 to meet its financial covenants. Everyone seemed to understand that the restructur- ing effort was much broader than originally contemplated. Motorola, Iridium's largest investor and general contractor, admitted that the project might have to be shut down and liquidated as part of bankruptcy proceed- ings unless a restructuring agreement could be reached. Motorola also stated that if bankruptcy occurred, Motorola would continue to maintain the satellite net- work, but for a designated time period only. Iridium had asked its consortium investors and contractors to come up with more money. But to many consortium members, it looked like they would be throwing good money after bad. several partners made it clear that they would simply walk away from Iridium rather than providing additional fund- ing. That could have a far-reaching effect on the service at some locations. 24 Hawn, "High Wireless Act." 25 Cauley, "Losses in spaceIridium's Downfall." Therefore, all partners had to be involved in the restructuring. Wall street analysts expected Iridium to be allowed to repay its cash payments on its debt over several years or offer debt holders an equity position in Iridium. It was highly unlikely that Iridium's satellites orbiting Earth would be auctioned off in bankruptcy court. August 1999 On August 12, Iridium filed for bankruptcy protection. This was like having "a dagger stuck in their heart" for a company that a few years earlier had predicted financial breakeven in just the first year of operations. This was one of the 20 larg- est bankruptcy filings up to this time. The stock, which had been trading as little as $3 per share, was suspended from the NAsDAQ on August 13, 1999. The cost of Iridium's phone calls had been reduced to around $1.40 to $3 per minute, and the handsets were reduced to $1,500 per unit. There was little hope for Iridium. Both the business plan and the technical plan were flawed. The business plan for Iridium seemed like it came out of the film Field of Dreams, where an Iowa corn farmer was compelled to build a base- ball field in the middle of a corn crop. A mysterious voice in his head said, "Build it and they will come." In the film, he did, and they came. This made for a good plot for a Hollywood movie, but it made a horrible business plan. In 1992, Her- schel shosteck, a telecommunications consultant, said: "If you build Iridium, peo- ple may come. But what is more likely is, if you build something cheaper, people will come to that first." The technical plan was designed to build the holy grail of telecommuni- cations. Unfortunately, after billions were spent, the need for the technology changed over time. The engineers who designed the system, many of whom had worked previously on military projects, lacked an understanding of the word "affordability" and the need for marketing a system to more than just one cus- tomer, namely the DoD. "satellite systems are always far behind the technol- ogy curve. Iridium was completely lacking the ability to keep up with Internet time," stated Bruce Egan, senior fellow at Columbia University's Institute for Tele-Information. September 1999 Leo Mondale resigned as Iridium's chief financial officer. Analysts believed that his resignation was because a successful restructuring was no longer possible. According to one analyst, "If they [Iridium] were close [to a restructuring plan], they wouldn't be bringing in a whole new team." 26 Paterik, "Iridium Alive and Well." THE IRIDIUM "FLU" The bankruptcy of Iridium was having a flulike effect on the entire industry. ICO Global Communications, one of Iridium's major competitors, filed for bankruptcy protection just two weeks after the Iridium filing. ICO failed to raise $500 mil- lion it sought from public rights offerings that had already been extended twice. Another competitor, the Globalstar satellite Communications system, was still financially sound. Anthony Navarro, Globalstar's chief operating officer, stated, "They [Iridium] set everybody's expectations way too high." SEARCHING FOR A WHITE KNIGHT Iridium desperately needed a qualified bidder who would function as a white knight. It was up to the federal bankruptcy court to determine whether someone was a qualified bidde