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Motorola Iridium - The W1nners' Club

Barry Bertiger was one of Motorola’s brightest engineers who first concocted the idea for the Iridium project in 1985 when his wife complained that she was unable to reach clients via her cell phone from the Bahamas.

 

As a result, Bertiger envisioned a communication framework that would allow effortless communication between every corner of the planet.

The mobile visionary pitched his idea to senior executives at Motorola who initially rejected the plan. It was Robert Galvin, the company’s chairman at the time who gave Bertiger the approval to go ahead with the project and gather together a stellar team of engineers and businessmen. The idea was to assemble a network of low orbiting satellites that cover the entire orbit of the earth, and to link to each other with mesh technology for routing calls anywhere in the world.

Work on the project began in 1987. Whilst satellite phones were readily available back then, their coverage was limited and the transmission and reception latency made conversations difficult due to the height at which the satellites orbited. Motorola proposed the creation of a service that was far superior by constructing a massive network of satellites that would provide global coverage. The satellites in question would have a lower orbiting altitude than that of competitors and as a result, the quality of transmissions would be dramatically improved.

The estimated cost of the project was $7 billion and would involve launching 77 satellites into low earth orbit – hence the name Iridium after element 77 in the periodic table.

The launch of the satellites began early in 1997 from sites in Kazakhstan, China and America. Despite the technological brilliance of the plan, a lot had changed in the world since the late 1980s. People now expected their phones to be lightweight, capable of being used inside buildings and reasonably cheap to make calls from. Iridium phones by contrast were heavy objects due to their need for powerful batteries, they didn’t work inside buildings, in the shadows of buildings or under trees and cost about $10 per minute to use. The satellites also spent 70% of their time over the planet’s oceans and as a result were not usable for much of their life. Alongside this, the initial demand that was anticipated by Iridium’s creators had been satisfied to a certain degree by the launch of 2G systems such as GSM in the 1990s. By this point the market for satellite phones was estimated to be 2-3% of the mobile phone market and other companies were also vying for their share of the satellite market.

At a cost of $7 billion, Iridium required over a million subscribers to break even but by 1999 it had only gained 55,000 customers and was losing money at an astonishing rate.

By August 1999, Iridium had gone bankrupt and its customers found themselves without a dialling tone. Despondent Motorola stockholders, watching the value of their shares plummet as Iridium crashed and burned, suggested sending up the project’s marketing and engineering team in rockets without spacesuits to join their orbiting financial debacle.

There were several subsequent attempts to sell Iridium, but no company could afford it.

So where did things go wrong for a project that was once hailed as, “a first model of the 21st-century corporation,” by Wired magazine?

Iridium ultimately failed to deliver on several fronts:

  1. There was a failure to consider the time that was required to build and implement the project’s infrastructure.
  2. There was a failure to truly understand the changing demand for the service and the product it had to offer.
  3. A blindness to the actual costs of the project and potential revenues.

 

In our opinion, the Iridium project was just a rather expensive oversight on the part of Motorola. Our publisher Darcus White once entered a pub quiz where he too wasn’t aware that 70% of the surface of the earth is covered in water – although in his defence he didn’t spend $7 billion before this fact came to light.

 

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