Reviving Iridium

"The brilliance of the technology cannot take precedence over the market case. At the end of the day, if you're spending $5 billion on the technology, there better be a market for it. And if there isn't, there will be great humiliation."

- Herschel Shosteck, a Wheaton-based wireless analyst, in March 2000.

"Iridium failed to match its system to its mission which caused too much pressure on the company to get customers quickly."

- Leslie Taylor, a consultant for the satellite industry in Washington, in March 2000.

Iridium's Failure

In August 1999, Iridium LLC¹ (Iridium), the world's largest provider of global mobile satellite voice and data solutions, filed for Chapter 11² bankruptcy protection in the United States Bankruptcy Court.

The news did not come as a major surprise to the global telecommunications industry since the company's financial trouble was well known. It had defaulted on US $1.55 billion in bank loans.

Considering the company's investment loss of US $5 billion, the bankruptcy court imposed a deadline of March 15^th 2000 to either bring forth a purchaser or to close its operations.

In response, Iridium promised that if it couldn't attract a buyer by 5 p.m. that day, it would proceed with plans to liquidate. Despite the company's best efforts, it was not able to convince any party to support its business and it was forced to file for bankruptcy.

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1] LLC or limited liability company is a hybrid legal entity that has the characteristics of a corporation and a partnership.
An LLC provides its owners with corporate-like protection against personal liability, although it is treated as a
non-corporate business organization for tax purposes.

2] Often referred to as 'business reorganization,' Chapter 11 bankruptcy is one of the most complex areas of the US
bankruptcy law. Organizations/individuals can file for Chapter 11 bankruptcy to deal with their financial problems of a
large magnitude. Those who file for Chapter 11 can propose a payment plan and their creditors can vote on this plan.
If a stipulated number of creditors vote in favor of the plan, it is approved. Once it is approved, Chapter 11 essentially
rewrites many of the contracts the debtor has with the creditors and thereafter both parties act according to the new
agreement.

Case Details

Case Code : BSTR031
Themes: Turnaround Strategy
Case Length : 11 Pages
Period : 1999-2001
Organization : Iridium LLC
Pub Date : 2002
Teaching Note : Available
Countries : USA
Industry : Telecommunication

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