Though an entire satellite fleet upgrade by Iridium Communications Inc (NASDAQ:IRDM) should assure shareholders of a long-term bright future, it isn’t having the desired effect. Instead, investors appear worried about the whole issue of the satellite network upgrade. The worries stem from heightened concerns over potential service disruptions that could anger Iridium’s existing customers and put off prospective ones.
SpaceX rocket explosion
The high-profile SpaceX explosion this past week has put Iridium in the spotlight. The company has embarked on a mission to replace its vintage satellites with an entirely new fleet. Iridium intends to have the new fleet of satellites right in place so that they can begin commercial operation before the end of 2017. As such, there are tight schedules and massive work to be done to make the fleet upgrade a success.
Iridium is banking on the launches of some 10 next-generation spacecraft planned for between mid-September and the beginning of October to put its new satellites into orbit.
However, with the recent SpaceX launch failure, investors are asking what might happen with Iridium’s fleet if the spacecraft it is betting on were to be hit by launch hitches. That explains why the share price of IRDM is looking depressed at the moment.
If Iridium doesn’t renew its satellite network in time, its customers might start feeling the heat of service failures, which could in turn hurt the company’s image and business prospects. Additionally, in terms out that a number of government agencies are waiting to see the quality of data from Iridium’s upgraded satellite fleet before they can buy communication services from the company. As such, delayed deployment of a new fleet can delay Iridium’s new revenue streams.
Subscriber growth
As Iridium works to upgrade its satellite network, the company said that for the 12 month period to June 30, it shipped 2,200 units of its communications equipment known as the Iridium Pilot system. The company further said that subscription to its Iridium OpenPort services rose 9% in the same 12 months.
How Iridium fared in 2Q2016
Iridium generated revenue of $109.19 million, which rose 7.1% YoY and topped the consensus by $1.85 million. However, EPS of $0.22 missed the consensus estimate of $0.25.