Iridium's 911: Please Deposit New Investors

Iridium is falling to earth. The global satellite-telephone network that was supposed to let even jungle-trekking CEOs keep in touch has been bleeding money and racking up disappointments since its launch last fall. Now its investors are threatening to hang up. A day after Motorola, which owns an 18 percent stake, said that the company might have to declare bankruptcy unless its partners chip in more money, Lockheed Martin announced Thursday it wouldnt be upping its 1 percent investment any time soon. Iridium will miss its next interest payment to bondholders, and its bankers have given it until August 11 to come up with a new business plan. The Wall Street Journal has nicknamed the company "Icarus." What went wrong? TIME business writer Karl Taro Greenfeld says Iridium showed up at the telecom party a little too early.

"I think everyone sensed that this type of product was going to be cheaper — and better — in the near future," he says. "Iridium costs something like $2,000 up front and $7 a minute — theyre having too much trouble attracting subscribers." Mass-market appeal may have been doomed by a rather shocking deficiency: the phones dont work inside buildings and in urban areas. So Iridium has been forced to rejigger its target audience from globe-trotting yuppies with big egos and bigger expense accounts to a decidedly different niche: mariners, oil-rig workers and the military. That glamour hemorrhage has turned Iridiums once-$70 stock into a $6.75 dog. And the competition has come in droves companies like Ellipso, Vodafone and Teledesic (which wants to up the ante with an Internet-in-the-sky), arriving late, have benefited from improved technology and learned from Iridiums mistakes. Meanwhile, the first star in the sky could well be the first to get shaken out when the industry matures. Even oil-rig workers may want something they can use in the bathroom.