Fall from grace: Once a golden opportunity, Iridium hits bottom

Iridium LLC may be discovering the hard way that even the best technology doesn't make a successful company. Many critics say that the technology Motorola developed for Iridium is commendable, but the marketing and positioning of the service led Iridium to file for Chapter 11 protection.

Rumors abound about what went wrong as the high-profile company continues to struggle with a service that never really got off the ground. One report described about 1 million potential customers around the world inquiring about service after the initial marketing campaign. Reportedly, few of those inquiries ever received a follow-up sales effort. Today, Iridium is said to serve from 10,000 to 20,000 customers worldwide.

"The beauty is we learn as we go," said Jim Walz, CEO and president of Iridium North America. "We had nothing to compare to." His company, which owns the licenses and rights to operate in North America, is safe as long as the constellation keeps operating. With time, he believes the right services packages and marketing will surface.

So what could be a white knight for Iridium? The U.S. government is one possibility, said Rob Norcross, vice president of Mercer Management Consulting. Although the government couldn't buy the constellation outright, it could guarantee usage payments, which is as good as investing in the company. Iridium doesn't rely on local switched public phone systems, so it "fits extraordinarily well with military purposes," Norcross said.

While Iridium's troubles may affect other satellite companies still preparing to launch, some believe it shouldn't.

"It's fair to be concerned. But Iridium is not a failure of satellites or technology," Norcross said. Investors of future satellite concerns, though, should be "careful but not dismissive."

One of those future companies, Globalstar, believes its model of partnering with existing telecom companies, such as Vodafone AirTouch in the U.S., should be more successful, said a spokesman.