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Iridium facing Chapter 11
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July 14, 1999: 3:13 p.m. ET
Motorola says troubled satellite phone firm may have to restructure
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NEW YORK (CNNfn) - Motorola Inc. officials said Wednesday troubled satellite telephone firm Iridium LLC, which Motorola has helped bankroll, may be forced to file for bankruptcy or find some other means of restructuring to avoid dismantling its business.
Motorola officials also reiterated that it won't provide more funds for the financially troubled company without help from other backers.
Motorola (MOT), a wireless communications and semiconductor maker, said in its second-quarter earnings report late Tuesday that it may have to take a special charge in the third quarter associated with its obligations to Iridium. Motorola officials repeated Wednesday that such a charge is possible, but also said that earnings and sales targets for the third quarter and full year "are also reachable."
Motorola stock dropped 2-1/4 to 94-1/4 in afternoon trade. Iridium (IRID) fell 1-5/16 to 6-7/8. Shares in the satellite provider have traded as high as 60-1/2 within the past year.
Motorola and other firms have helped bankroll Iridium, which has had difficulty gaining subscribers for its global telephone service. Motorola officials told reporters and analysts Wednesday that Iridium could either restructure out of court, seek Chapter 11 bankruptcy protection in court, or dismantle its business by liquidating assets.
"It is Motorola's hope that this last scenario [liquidation] can be avoided," Motorola president and CEO Robert Growney, said in a conference call.
Growney also repeated the company's position that it won't increase support for Iridium unless other backers also contribute. Iridium's lenders have extended its $800 million credit three times, and analysts have said the company is in danger of defaulting.
While Growney said Motorola remains "supportive" of Iridium, the company also is "very sensitive to the best interests of our stockholders."
During the conference call, Growney also said the First Call Corp. consensus third-quarter earnings estimate of 51 cents a share and sales projection of $7.8 billion are "within reach."
He also said 1999 profit of $2 per share and revenue estimates of $31.6 billion are "also reachable." Motorola said profit growth likely will be driven by strong sales of wireless phone handsets and continued improvement in the semiconductor industry.
Late Tuesday, Motorola posted second-quarter earnings that beat Wall Street expectations. Excluding one-time charges, Motorola earned $273 million, or 44 cents per share, up from $6 million, or 1 cent per share, in the 1998 period. Analysts surveyed by First Call had forecast earnings of 41 cents per share. 
-- from staff and wire reports
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