Iridium Communications (IRDM)

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David Tee

Iridium Communications (IRDM), Motorola Solutions (MSI)

Cramer was stumped during lightning round when a caller asked him about an $8 satellite phone company, Iridium (IRDM). This company and its much larger competitor, British company Inmarsat ISAT-LN, share a business with a $1.3 billion market growing at a rate of 10% per year. While this rate might not seem outstanding, the barriers to entry are high, since it requires a $2.3 billion commitment to launch a new satellite. The company provides satellite phones to airplanes and ships and is working on extending its reach to provide internet access as well.

Iridium's satellites are low orbit, and are easier to manipulate and repair compared to Inmarsat's satellites which are located higher up. Iridium was spun off by Motorola (MSI) in the 90s and was struggling for a long time before making a comeback and trebling market share in just 8 years. The company expects a 20% growth in subscribers this year and is looking to expand into Russia, China and India. The company offers a smart phone and a cheaper "dumber" phone to give its customers different options in capability and price.

One drawback is Iridium has to spend $2.1 billion over the next few years launching new satellites that will provide much needed replacements. Although 95% of it is financed, such launches can face problems, but a successful result will mean twice the number of subscribers. Iridium is 35% cheaper than its chief competitor, and Cramer expects this company to continue to take share and take names.

References

http://seekingalpha.com/article/253883-cramer-s-mad-money-11-earnings-to-watch-next-week-2-18-11?source=yahoo