Motorola Iridium: an analysis

As you read previously, Motorola delivered the Iridium project on time, on budget and to scope. So, was this a successful project?

Do you or your friends or your relatives own a mobile phone? You probably all have one, but is it a satellite mobile phone? In fact, very few people own this type of mobile phone.

In 1998, when Motorola launched its satellite mobile phone, people expected their phone to be lightweight, to work indoors and for the calls to be relatively cheap. Iridium phones were: heavy (not easily carried in a pocket), needed powerful batteries, did not work inside buildings and it cost around $10 per minute to make calls.

By this time, the public started to own other mobile phones that were cheaper and lighter. These phones connected to the network via antennas which had proliferated in the period while Motorola was creating its satellite system.

At a cost of construction of $7 billion, Iridium needed over one million subscribers to break even. By mid-1999 it had gained 55,000 subscribers and was rapidly running out of money. In August 1999, Iridium was bankrupt and subscribers found themselves without a dial tone. There were several attempts at selling Iridium, but no company could afford it.

By early 2000 the only employees left at Iridium were those employed to ‘de-orbit’ the satellites (during the estimated period of two years).

At the time, cheap mobile phones based on GSM (Global System for Mobile Communications) technologies became widely available, the signal reception quickly improved and so very few people needed a satellite phone.

In 2000, Iridium Satellite LLC (contracted by the US Defence Department) took over the company for $35 million.

Motorola invested around $7 billion in the whole project. Therefore, when Iridium Satellite LLC took it over at a market price of only $35 million, it had made a loss of 99.5%.

What can you learn from this?

What the Iridium project shows is that assessing the success of a project is not straightforward. Major projects are often delivered over budget and late, but there is something more to consider. Major projects involve a wider perspective. If you look only at a project’s time and cost performance, you do not see the full picture of project management. You will find out more about this in the next section.

Please refer to the glossary to check any terminology you are unfamiliar with: Glossary of Project Management Terms

Coming up...

In the next section you will consider how project success is often measured from the main contractor's perspective.