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Motorola demands help keeping Iridium in orbit

Issues stern ultimatum to fellow investors

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Motorola yesterday issued an ultimatum to fellow investors in the troubled satellite-based cellphone service, Iridium: start supporting the company, or it will pull the plug on its own extra financial support. Issued alongside Motorola's Q2 results, the statement said the company "will not provide any further support beyond existing contractual commitments unless there is substantial participation in the Iridium restructuring from all parties with significant financial interest [in it]". Motorola's concerns are understandable: it formed Iridium in the first place, now owns 18 per cent of the company, but, more importantly, has guaranteed a good proportion of the satellite operation's debt. However, as Iridium struggles to stay in orbit, largely thanks to poor marketing and over-priced airtime and handset products, its backers have become increasingly worried that the company has little time left to it. Certainly if Motorola cut back its support, Iridium would have very real problems indeed, so presumably its tactics here are to force other investors, including Lockheed Marting and Raytheon, to cough up some extra cash of their own -- or face their investment going down the tubes. Motorola continues to defer recording the money it makes from its operations and maintenance contract with Iridium, and it will be interesting to see to what extent that covers the cost of Motorola's support for the company. This quarter it recorded a $126 million charge to write down the value of its Iridium bonds, and predicted other charges next quarter. These coming costs are likely to be significant, and balanced only by the sale of "several businesses and assets", the company said. ® See also Teledesic confirms Motorola support

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