April 11, 2000
Iridium, Bankrupt, Is Planning a Fiery Ending for Its 88 Satellites
By DAVID BARBOZA
HICAGO -- The jokes about the government using the satellites
for "Star Wars" target practice don't seem so funny anymore.
In the coming months, Iridium LLC, the bankrupt global satellite
telephone company, will begin sending 88 giant satellites spiraling
toward Earth, where they will burn up in a fitting and fiery end to
one of the colossal corporate failures in recent memory.
Scott Troyanos for The New York Times
Satellites built for Iridium's system by Motorola were controlled
by people like Bill Greenen, foreground,
and Alex Pescaru.
After spending more than $5 billion on a system that promised to
communicate "with anyone, anytime, virtually anywhere in the
world," Iridium could muster only about 55,000 subscribers, not
enough even to pay interest on its start-up costs.
The company's shares plummeted months ago, and banks,
bondholders and investors are left to wince at their staggering
losses. Motorola, which started it all, has written off more than
Now, the company finds itself fumbling through a messy and
sometimes comic liquidation. Customers are angry, half the system
is shut down, the other half is apparently still operating, and
Iridium is still holding out the hope that someone will buy the
satellite network before it goes up in flames.
One thing is clear, though: rarely has a company so ambitious,
and so heavily financed, fallen so hard and so quickly.
"It was a technology that didn't live up to its hype or its
billing," said James Grant, editor of Grant's Interest Rate
Observer, who has chronicled Iridium's problems, noting that the
telephones could not even be used indoors. "People chose to
overlook the risks because they were bedazzled by the technology
and the promoters or sponsors."
Two satellite networks are trying to keep the idea alive: ICO
Global Telecommunications, which is trying to climb out of
bankruptcy under its new owner, Craig O. McCaw, the cellular phone
pioneer; and Globalstar LLC, the venture backed by Loral Space and
Communications and led by Bernard Schwartz, who once called Iridium
a "three-legged horse."
But as they do, here is what it looks like to shut down a global
satellite service that officially lasted 474 days.
According to Motorola, whose engineers conceived the idea in the
Arizona desert in 1987, time and marketing failures hurt the
"This was a technology that worked," said Scott Wyman, a
spokesman for Motorola, at headquarters in Schaumburg, Ill., near
Chicago. "But Iridium management pursued a marketing plan that in
retrospect may not have been targeted at the most attractive
Iridium itself has little to say, with all calls referred to the
deputy general counsel. The chief executive resigned quietly on
March 17 -- the day Iridium, in a letter to subscribers, declared
Now, under the scrutiny of a bankruptcy judge, a few remaining
executives, lawyers and accountants are trying to safely dismantle
a service that took 12 years to create, and less than two to
The company has vacated its Washington headquarters, tried to
sell its building in Landsdowne, Va., held a job fair for
employees, and talked to the U.S. Space Command Center in Colorado
Springs, Colo., about the proper time to dispose of a constellation
of low-earth-orbit satellites traveling at 17,000 miles an hour.
While a few executives hold out hope that someone might buy the
satellites, this seems increasingly unlikely.
A few loyal subscribers still get free service in North America.
Motorola sent out notices saying that service would end at 11:59
p.m. on March 17. But the company continues to offer limited
service, largely because the federal government, an early investor,
is still trying to wean itself away from the global network.
Some of those who lost service are not happy. For Jack Conroy,
who flies an ambulance helicopter in Anchorage, Alaska, Iridium
phones were a lifeline. "Communications up here is real
difficult," he said. "If I'm in a canyon, it's hard to get
service. With Iridium, you could."
The death knell was actually sounded more than a month ago, when
McCaw decided against bailing out the company and creating a larger
satellite network with ICO Global.
The big thinkers are
still baffled: How
could so promising a
venture go so wrong?
On March 2, Ronald Brouckman, Iridium's chief operating officer,
briefed the staff on what life would be like once McCaw took over.
But later that night, an employee said, "McCaw called our COO and
said, 'I've changed my mind."'
Many employees were already demoralized. In the final months,
they say, John Richardson, the chief executive, rarely showed up at
headquarters. Richardson, a former executive at Barclays Bank, was
unavailable for comment.
Many who held on were dubbed "Iridiots," and they felt that
way. Employees say they often sat in quiet offices playing computer
solitaire or perfecting their Microsoft PowerPoint presentations.
"The whole thing was surreal," a former employee said. "We
were just waiting for the clock to run out."
Motorola has stopped making Iridium phones at its Libertyville,
Ill., plant and has closed its satellite communications division in
Eleven independent gateway companies that sold service around
the world are being dismantled. Iridium North America, whose
investors besides Motorola include Sprint and BCE of Canada, had
30,000 subscribers at its peak. The company, based in Chandler,
Ariz., is offering free service until Motorola pulls the plug, but
has trimmed its staff to 30 from 175.
The Defense Department, which had a $200 million contract to
participate in the project, also continues to use the service. It
says it spent $140 million building its own gateway in Hawaii and
paying Motorola to run it, and buying 3,000 satellite handsets. Now
the Pentagon is looking for alternatives. "We're going to have to
evaluate our next step," a Defense Department spokeswoman, Susan
The Iridium network is controlled by the Satellite Network
Operations Center, in Landsdowne, which is operated by Motorola.
About 100 staff members are still on hand, monitoring the
satellites, taking calls and coordinating with the Space Command
Center to bring the satellites down.
The command center, a sort of traffic cop that tracks objects in
space, including tiny debris, will essentially offer guidance to
Motorola about where and when to deorbit the satellites.
"We're actively tracking 8,200 objects -- 8,120 to be exact,"
said Capt. Steven Ramsay. "We even track an astronaut's glove from
a Gemini mission in the 1960s."
According to the Space Command Center, Iridium will probably
deorbit the satellites four at a time, firing their thrusters to
drop them into the atmosphere, where they will most likely burn up.
But "they expect to have some parts survive because these are
pretty big satellites," a spokesman, Maj. Perry Nouis, said.
It took 12 years and more than 20 million lines of computer code
to build the system, but less than two years to realize that not
enough people wanted to use it. It will take two years more to pull
the satellites out of orbit.
Iridium has few other assets, with a skeleton staff of about 60
employees -- mostly accountants, lawyers and other administrative
people. After McCaw pulled out, Iridium told the bankruptcy court
that no one had put up the $10 million necessary to qualify as a
serious bidder, and he laid off 175 people.
There were plenty of inquiries, but some seemed almost comical.
Some did not have the money, Iridium officials say, others did not
have even a proper telephone number. They keep coming. "I still
get 50 calls a day," said Robert N. Beury, Iridium's deputy
general counsel. "Some people want to go up with space tugs, and
move the things somewhere else."
Looking back, no one can make sense of it. Wall Street loved
Iridium; there were supposed to be 1.6 million subscribers this
year, and 27 million by 2007. Sure, there were bulky handsets,
technical glitches and a poor marketing effort, analysts say, but
how could they have been this wrong?
Easy, others say.
"Everyone in the industry has looked at Iridium as the pioneers
of satellite phone service," said Rikki Lee, editor of Wireless
Week. "And when they couldn't find anyone to pay $3,000 for a
phone and $7 a minute for service, it was like -- duh! There aren't
all that many people who track up to the North Pole."